1. Zagreb, 28 September 2004 The South East Europe gas market: a preliminary analysis of facts and opportunities from the Regulators perspective GAS TASK FORCE - WG CEER SEEER

2. 2 The CEER SEE Gas Task Force Gas fully included in the ECSEE / Athens Process Gas fully included in the ECSEE / Athens Process Regulatory Authorities have an important role to play in the establishment of a SEE regional gas market Regulatory Authorities have an important role to play in the establishment of a SEE regional gas market In February 2004 the CEER SEEER WG created the Gas TF In February 2004 the CEER SEEER WG created the Gas TF AEEG (leader), ANRGN, RAE, E-Control, EMRA, SERC New Regulators and Ministries of countries w/o Regulators invited to participate Objective of the GAS TF: Objective of the GAS TF: to provide the regulatory input necessary for the development of the regional natural gas market in the SEE region and compatibility with EU legislation

3. 3 Scope of the GAS TF WORK of the WG CEER GAS TF, 2004: 1. Assess the current status of the national gas markets of the countries of the region, with a view to prepare a report on the existing situation 2. Develop proposal related to the next steps to be taken by the WG on the optimal development of the gas market in the SEE region 3. Elaborate the methodology to be used by the SEEER WG for the know-how transfer process and the experience gained through the Madrid Process to the SEE REM 4. Start to develop a medium term view of the SEE integrated gas market harmonised with EU market

4. 4 GAS market in SEE DELIVERABLES OF THE GAS TF: 1 - Market structure and dynamics: Demand pattern for each country, including its split by sector; Supply portfolio, including indigenous production and imports; Existence of long term, take-or-pay contracts; Demand forecast and the possible future sources of supply; Tariffs methodology Existing cross border trading activities Key players and their role;

5. 5 GAS market in SEE DELIVERABLES OF THE GAS TF: 2 - Existing and planned natural gas infrastructure : Transmission network Distribution network LNG facilities Storage facilities New projects 3 - The status of national gas market liberalization, including transit and compliance with the EU Gas Directive.

6. 6 GAS market in SEE DELIVERABLES OF THE GAS TF A questionnaire has been drafted and filled by Regulators (or Ministries) A questionnaire has been drafted and filled by Regulators (or Ministries) Preliminary results are presented Preliminary results are presented A full Report will be drafted for the Athens Forum A full Report will be drafted for the Athens Forum

7. 7 GAS market in SEE: The Market "Neıghbours"100.8932%1286.9

8. 8 GAS market in SEE: Industry and infrastructure "Neıghbours"100.8932%1286.9

9. 9 GAS market in SEE: Supply "Neıghbours"100.8932%1286.9

10. 10 SEE GAS : Market and Infrastructure Sizeable total market (50 Bcm/year in Balkans, Turkey) Sizeable total market (50 Bcm/year in Balkans, Turkey) Only Romanian market nearly mature Only Romanian market nearly mature Turkey and Bulgaria are fast developing markets Turkey and Bulgaria are fast developing markets Rational structure of network industries (National TSO, Regional or Provincial DSO) Rational structure of network industries (National TSO, Regional or Provincial DSO) Inadequate infrastructure, notably distribution and storage Inadequate infrastructure, notably distribution and storage Domestic resources limited except Romania Domestic resources limited except Romania Need to diversify external supplies, including LNG Need to diversify external supplies, including LNG Large cross border flows within SEE, likely to increase Large cross border flows within SEE, likely to increase

11. 11 SEE GAS: Market structure "Neıghbours"100.8932%1286.9

12. 12 SEE GAS: Regulation "Neıghbours"100.8932%1286.9

13. 13 SEE GAS : Market structure and Regulation Wholesale supply monopoly in most countries Wholesale supply monopoly in most countries No pipe to pipe competition No pipe to pipe competition Some eligibility in most countries Some eligibility in most countries Legal unbundling of TSOs, DSOs in most countries Legal unbundling of TSOs, DSOs in most countries Postage stamp tariffs in most countries Postage stamp tariffs in most countries Gas industry regulated in all countries Gas industry regulated in all countries Indipendent regulators established in most countries Indipendent regulators established in most countries TPA provisions mostly inadequate TPA provisions mostly inadequate

14. 14 SEE GAS market: goals that cannot be missed 1. Evolution at EU level (Implementation of Directive 2003/55/EC, Proposed Regulation on conditions of access to the gas transmission network, Madrid Process) 2. Specific circumstances and particularities of the ECSEE countries, notably the need to expand gas infrastructure and consumer access 3. Interaction between electricity and gas markets, notably environmental policy objectives 4. Role to be played by the SEE region as a route for the transit of gas between Eastern resources and Western consumers

15. 15 SEE GAS market: benefits and opportunities Remarkable benefits are expected for all involved countries and parties: Remarkable benefits are expected for all involved countries and parties: Marketing opportunities for existing and new suppliers New massive infrastructures to be developed and operated by TSOs, DSOs in SEE countries New customers to gain access to natural gas increased in SEE countries Existing customers to benefit from economies of scale New sources of supply available for EU Member States Environmental quality improvement, contribution to achieving Kyoto targets Increased security of supply in a common market An integrated EU-ECSEE natural gas market

16. 16 SEE GAS market: benefits and opportunities New infrastructure, included among EU projects of common interest, is under construction or under study New infrastructure, included among EU projects of common interest, is under construction or under study Turkey - Greece; Turkey - Greece; Greece – Italy; Greece – Italy; Turkey - Bulgaria - Romania - Hungary – Austria (Nabucco); Turkey - Bulgaria - Romania - Hungary – Austria (Nabucco); Greece – FYRoM – Serbia – Bosnia - Croatia – Slovenia Greece – FYRoM – Serbia – Bosnia - Croatia – Slovenia

17. 17 SEE GAS market: challenges Most benefits can be achieved through a single market, most national markets too small Most benefits can be achieved through a single market, most national markets too small ECSEE commitment to implement harmonized regulation needed ECSEE commitment to implement harmonized regulation needed Cost reflective tariffs required to promote new infrastructure Cost reflective tariffs required to promote new infrastructure Large infrastructure projects to be regulated in line with Directive 2003/55/EC Large infrastructure projects to be regulated in line with Directive 2003/55/EC Harmonized and stable regulation to be provided for a common ECSEE market Harmonized and stable regulation to be provided for a common ECSEE market