Norwegian Gas Transportation The Norwegian Gas Transportation System

• 7800 km of large diameter high pressure pipelines

• Langeled is the longest sub-sea pipeline in the world

• Riser platforms Kollsnes Draupner S/E • Onshore processing facilities (Kårstø and Kollsnes) Kårstø • Receiving terminals • exports 100BCM gas annually • Gas deliveries from Norway have never been higher and continue to rise • Norway is the world’s second largest gas exporter with >15% share of European market

From 1 January 2003 most of the upstream gas pipelines in Norway were merged into one system – the Gassled gas transportation system The Gassled system is owned by petroleum companies on the NCS was appointed operator of the Gassled system

Gassled is open for third party access The transportation tariffs are stipulated by the Norwegian Ministry in a separate regulation The access regime and Gassco’s various roles under the system is further regulated in the petroleum regulations Gassco

Established by the Parliament in 2001. Owned 100 % by the Norwegian State The purpose was to create an independent, neutral company who could take on the responsibility of the gas transportation system: – Operator – System Operations – Capacity Management – Development of the system Offices/operation in Norway, , , Employees: approx. 300 Regularity and security of supply

• Planning and dispatching shippers’ gas nominations Field Operator • Monitoring of physical Capacity condition of the network Aggregate Management Aggregate Field ShipperShipper • Balancing handling of Availablity nomination Shipper Shipper nominations and deliveries Availability + = Gassco Transportation • Blending of streams to Downstrean Nomination nominations meet sales gas Opflex and nominations matching specification Downstream Lineflex Operator Gas sales nominations • Handling of upset situations – taking compensating measures

Pipeline Avail Technical Capacity Regularity 2007 [MSm3/d] [%] Zeepipe (to Zeebrugge) 42.2 99.88 Franpipe (to Dunkerque) 54.8 99.91 /Norpipe (to Emden) 39.9 99.93 Europipe 1 (to Emden) 45.4 99.84 Europipe 2 (to Dornum) 71.2 99.78 Vesterled (to St. Fergus) 38.4 98.98 Langeled (to Easington) 69.4 99.23 Total 99.66 Capacity Management - Mandate

Mandate given in “Petroleum Laws and Regulations: “Forskrift til lov om petroleumsvirksomhet”, Chapter 9: regulates access to upstream gas transportation system on NCS. Regulation of tariffs in the Gassled system is found in: “Forskrift om fastsettelse av tariffer mv. for bestemte innretninger”. Further details are described in standardized agreements and procedures: - Terms and Conditions for Transportation of Gas in Gasled - Booking Manual - Shipper Manual ”The System” Kvitebjørn FLAGS Visund Statfjord Troll Nyhamna Oseberg Norne Gullfaks Kollsnes Heimdal Åsgard St. Fergus Grane Kårstø

Sleipner Tjeldbergodden Draupner

Ekofisk

Dornum

EMS/EPT1 Zeebrugge Dunkerque NPT Netra/EPT2 Easington Booking and Tariff regime

Visund Kvitebjørn Gullfaks T G FLAGS F Statfjord Veslefrikk Dry Gas Network Troll A Brage Kollsnes Næringspark : Entry : Exit Area E Kollsnes Pipeline Kollsnes Rich Gas Network Norne Nyhamna Oseberg : Entry : Exit Heimdal Kårstø B Grane H Heidrun

St. Sleipner Snurrevarden Fergus D Naturkraft Easington Rogass Ekofisk Exit UK DNQ Dornum • Tariffs are regulated EMS (7 % Rate of return before tax) Zeebrugg NPT e • Entry/exit tariff system for Exit Western Axis Exit Eastern Axis areas: A - H (France- Belgium) (Germany) • Tariffs have capital and opex components Capacity Terms

Capacity limitation, imposed by the network Hydraulic capacity (system effects e.g. not sufficient pressure) and fuel and losses

Available Technical Capacity Operational flexibility

Committable Capacity Capacity not made availablefor booking (helf back by the Operator)

Bookable Capacity Spare capacity to be offered for booking

Booked Capacity Booked capacity Criterias for Qualified Shippers

• The Petroleum Regulations explicitly states that shippers must have a Duly Substantiated Reasonable Need (DSRN) in order to be allocated available capacity. The concept of DSRN has been further specified by Gassco and shippers, and is encapsulated in the term “qualified need”. – Qualified need takes into account production rights as specified in the production permits or the estimated forecast production. Where appropriate any carry-forward balance, gas sold, purchased and/or lent at an entry point, alternative capacity rights outside Gassled, and volumes in the process of being developed shall be taken into account

• Gassco will request a credit rating of the potential shipper from a credit rating company (recognized as NRSRO). The credit rating will fall into one of three categories: – If a credit rating of shipper exists and is minimum BBB, the applicant is qualified. – If a credit rating of the parent company exists and is minimum BBB the shipper may qualify, if a parent company guarantees the equivalent to 24 months tariff. – If there is no credit rating of either company or the rating is below BBB – a bank guarantee is required from an A-rated bank equivalent to 24 months of the relevant tariff. September Bookinground

• Produce Gassled system capacity report (GSCR) • Establish Bookable Capacity based on GSCR • Collect production forecasts from various fields • Based on reported field forecasts Capacity Management calculates: – DSRN (Duly Substantiated Reasonable Need) per Shipper for relevant Areas in Gassled – Shippers Abitity to Use (AtU) at exit points in Gassled Area D September Bookinground (cont)

• Spare capacity is offered in 2 capacity products: – Medium Term (monthly) for the two next contract years – Long Term (yearly) for the licence period of Gassled • Shippers can request for capacity within their DSRN and AtU limits • Capacity is allocated in accordance with existing rules (ie priority to Gassled owners and CAK (Capacity Allocation Key)). The capacity allocation process is subject to “Forvaltningsloven”. This mean that shippers can complain about Gassco`s capacity allocation to the Ministry (MPE). • In the bookingrounds Gassco allocate spare capacity at points in the following Areas – Richgas Areas (Area A,B,C,E,F, G,H) – Drygas Area (Area D) April Bookinground

April booking rounds follow the same principles as September booking rounds except for that: – No capacity report (GSCR) is produced. – The Medium Term period is shorter (17 instead of 24 months) After the booking rounds are finalized will shippers have an opportunity to reserve spare capacity on First Come First Served (FCFS) basis in the period up to the next booking round. Short Term Booking

• Every thursday will capacity for the 5th week ahead be sold in a Short Term Initial Bookinground (STIB). • Shippers can in this STIB request for daily capacity strips in this week. Allocation of the bookinground follows the same principles as in September and April bookingrounds. • The day after the STIB is finalized (every Friday at 10:00 (CET)), all days in the 5 week a head is opened for First Come First Served (FCFS) booking. • However, most of short term bookings will be done “day ahead” og “within day” so that shippers bookings on daily basis are in alignment with shippers nominations GasViaGassled.com

GasViaGassled.com is an online booking system: In bookingrounds will shippers do their requests in this bookingsystem. Allocation will therafter be done by Gassco. After the allocations have been performed, shippers can see the results immediately in the system. FCFS-booking: Allocations will be done by the system automatically as long as there is spare capacity on the relevant bookingpoint, and as long as the requests are within DSRN and AtU limits GasViaGassled.com View Capacity By Day GasViaGassled Secondary Market

On the open marketplace shippers can ask for more capacity, or offer capacity for sale. Capacity will be transferd between the shippers with full assignment. Payment obligation to Gassled are transferred from Seller to Buyer. Seller can ask for a premium or offer a discount in sell offers. Buyer can do the same in buy offers.

Offers on the marketplace can cover any period, within day, short term, medium term or long term. The seller can chop up his surplus capacity in any period he like, so that for example long term capacity can be sold as short term capacity. GasViaGassled Secondary Market

Gassco operates a Secondary Market where shippers can buy and sell capacity bilaterally or by using the open marketplace on the gasviagasled.com application Secondary Market Statistics

The following table shows capacity exchanged in the secondary market in 2008.

Percentage Premium in Percentage of of trades to Percentage of Average percentage Number of Total traded Booked Standard trades with premium/rebate( of Standard Gassled area Concluded Trades volume (MSM3) Capacity tariff premium/rebate NOK) Tariff Area A 2777 182,563 3,18 % 99,64 % 0,36 % -0,010 -14,17 % Area B 791 249,918 1,10 % 92,08 % 7,92 % 0,032 72,07 % Area C 3326 455,684 1,59 % 93,85 % 6,15 % 0,044 34,57 % Area D 254 144,69 0,13 % 96,98 % 3,02 % -0,010 -8,99 %

The vast majority of capacity are traded to regulated tariff with no additional premium/discount. Rebooking Service

• Shipper may not unbook capacity • Either re-book to Shipper alternative destination or • Sell on secondary market • Rebooking is dependent on Requires AtU to new • Capacity being available destination • Ability to Use (AtU) to new destination • Payment for rebooking Re- booking of • Pay higher of tariffs to the two destinations capacity involved • Otherwise no transaction fees Original New 2008 statistics Percentage of destination destination Number of Total rebooked Booked Gassled area Rebookings volume (MSM3) Capacity Area B -> Area A 583 160,9 2,80 % Area A -> Area B 256 149,8 0,66 % Area D 5076 2772,8 2,40 %