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Flame conference, Amsterdam, 13 th March 2007

Flame conference, Amsterdam, 13 th March 2007. Liberalisation and Security of Supply. Steve Surrall, Director Business Development, Europe Downstream. Legal notice. This presentation includes forward-looking statements. Such statements are only predictions and actual events

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Flame conference, Amsterdam, 13 th March 2007

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  1. Flame conference, Amsterdam, 13th March 2007 Liberalisation and Security of Supply Steve Surrall, Director Business Development, Europe Downstream

  2. Legal notice This presentation includes forward-looking statements. Such statements are only predictions and actual events or results may differ materially. For a discussion of important factors which could cause actual results to differ from the forward-looking statements, please refer to BG Group plc’s Annual Report and Accounts 2005.

  3. Introduction • Changes in the UK gas market • Implications for the European gas market • European consumers able to seize opportunity? Liberalisation and security of supply

  4. 400 350 300 250 million cubic metres / day 200 150 100 50 0 2004 2005 2006 2007 UK production Norway IUK imports BBL LNG terminals Stock withdrawals Changing composition of UK gas supply 2003-07 Source: National Grid New import flows replace declining UKCS production

  5. Investments decided in lower price environment 100 100 90 90 80 80 70 70 60 60 Langeled, BBL 50 50 Dated Brent ($/bbl) UK NBP month ahead (p/therm) 40 40 30 30 20 20 Grain LNG 10 10 South Hook, IUK Dragon 0 0 2000 2001 2002 2003 2004 2005 2006 2007 UK NBP (p/therm) LH scale Dated Brent ($/bbl) Source: Argus Capital deployed to supply growing import demand

  6. 100% 80% Other Other energy prices 60% Electricity per cent % Crude oil Heavy FO 40% Gasoil Gas price 20% 0% UK W.Europe E. Europe Oil price indexation: is it sustainable? European Buyers’ Term Contract Indexation by Region Source: Energy Sector Enquiry 2005-06 High oil prices may encourage revision of oil-indexed pricing

  7. Implications for investment • Competition and uncertain prices a challenge to investment? • UK and US examples prove this is not the case BG Armada rig, North Sea

  8. Transportation – investment in infrastructure • Access to infrastructure remains problematic • Alternatives to unbundling must be demonstrated BG pipe infrastructure Unused capacity rarely released to market

  9. Storage • Access to storage is key • Role of the regulator • incentivise new facilities • ensure fair access for new entrants • make storage available on non-discriminatory basis Rough storage facility TPA exemption can incentivise investment

  10. Implications for new entrants and NOCs • New entrants/NOCs seeking downstream role • European Commission recognises attributes of new entrants/NOCs • EU member states should welcome NOCs Egyptian LNG

  11. Conclusion • European Commission assert liberalisation and security of supply can co-exist • Open markets do not prevent the incentive to invest • Future UK gas supply position may have knock-on effects on aiding liberalisation

  12. Thank you

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