STATE ENERGY REGULATORY COMMISSION - BULGARIA PresentationPresentation ofof naturalnatural gasgas energyenergy sectorsector inin BulgariaBulgaria ANGEL SEMERDJIEV Commissioner Contents: 1. General overview of natural gas sector 2. Market structure 3. Specific regulatory aspects 4. Trends of development in natural gas sector 5. Projects for oil transition May 18-24, 2002 Newark, New Jersey – Washington, DC, U.S.A. 1.1. General overview of natural gas sector ¾ Pipelines and branch pipelines - 3 060 km ¾ 10 Compressor stations - 190 MW total capacity ¾ 170 Gas reduction stations - all over the country ¾ The annual capacity of gas transportation system is 26 billion m3 May 18-24, 2002 Newark, New Jersey – Washington, DC, U.S.A. STATE ENERGY REGULATORY COMMISSION - BULGARIA 1.1. General overview of the natural gas sector 1.1. Import and local production of natural gas in the country during 1997 – 2002 (mil. m3) Year 1997 1998 1999 2000 2001 2002* Import 4 856 3 824 3 381 3 186 3 150 3 200 Production 33 28 22 18 18 19 May 18-24, 2002 Newark, New Jersey – Washington, DC, U.S.A. 1.1.Import of natural gas in the country during 1997 – 2002 (mil. m3) 5 500 5 000 4 500 4 000 3 500 3 000 2 500 2 000 1 500 1 000 1997 1998 1999 2000 2001 2002 May 18-24, 2002 Newark, New Jersey – Washington, DC, U.S.A. 1.1. Local production of natural gas in the country during 1997 – 2002 (mil. m3) 35 30 25 20 15 10 1997 1998 1999 2000 2001 2002 May 18-24, 2002 Newark, New Jersey – Washington, DC, U.S.A. STATE ENERGY REGULATORY COMMISSION - BULGARIA 1.2.Transmission1.2.Transmission andand storagestorage ¾ 2 100 km gas transmission pipelines ¾ 10 Compressor stations ¾ The annual capacity of gas supplies system is 9 billion m3 ¾ Dynamic of natural gas supplies during 1997 – 2002 (mil. m3) 1997 1998 1999 2000 2001 2002* 4 594 3 791 3 253 3 417 3 140 3 122 May 18-24, 2002 Newark, New Jersey – Washington, DC, U.S.A. STATE ENERGY REGULATORY COMMISSION - BULGARIA Dynamic of natural gas supplies during 1997–2002 (mil. m3) 5 000 4 500 4 000 3 500 3 000 2 500 2 000 1997 1998 1999 2000 2001 2002 May 18-24, 2002 Newark, New Jersey – Washington, DC, U.S.A. STATE ENERGY REGULATORY COMMISSION - BULGARIA GasGas storagestorage Underground natural gas storage during 1997 –2002 (mil. m3) year 1997 1998 1999 2000 2001 2002* injection 429 238 229 121 194 240 withdrawal 253 222 148 352 184 260 May 18-24, 2002 Newark, New Jersey – Washington, DC, U.S.A. STATE ENERGY REGULATORY COMMISSION - BULGARIA Underground natural gas storage during 1997 –2002 (mil. m3) 500 400 300 200 100 0 1997 1998 1999 2000 2001 2002 inject ion withdrawal May 18-24, 2002 Newark, New Jersey – Washington, DC, U.S.A. 1.3.Distribution1.3.Distribution gasgas systemssystems ¾ Gas distribution pipelines - 500 km ¾ 29 gas distribution companies in 36 municipalities ¾ Small distribution companies – poor investment programs ¾ No connections to the transmission system May 18-24, 2002 Newark, New Jersey – Washington, DC, U.S.A. STATE ENERGY REGULATORY COMMISSION - BULGARIA Gas distribution companies in Bulgaria ÊÚ í ÊÚ ÊÚ ÊÚ ÊÚ ÊÚ ÊÚ ÊÚ ÊÚ ÊÚ ÊÚ ÊÚ ÊÚ ÊÚ ÊÚ ÊÚ ÊÚ ÊÚ ÊÚ ÊÚ ÊÚ ÊÚ ÊÚ ÊÚ ÊÚ ÊÚ ÊÚ ÊÚ ÊÚ ÊÚ ÊÚ ÊÚ May 18-24, 2002 Newark, New Jersey – Washington, DC, U.S.A. STATE ENERGY REGULATORY COMMISSION - BULGARIA 1.4.Transit1.4.Transit gasgas pipelinespipelines toto otherother countriescountries ¾ Transit to Turkey, Greece and Macedonia ¾ Gas transit pipelines - 960 km ¾ Compressor stations -5 ¾ The annual capacity of gas transit system is 18 billion m3 ¾ Dynamic of natural gas transited during 1997 – 2002 (mil. m3) 1997 1998 1999 2000 2001 2002* 6 863 7 550 10 415 11 893 12 731 13 700 May 18-24, 2002 Newark, New Jersey – Washington, DC, U.S.A. STATE ENERGY REGULATORY COMMISSION - BULGARIA Natural gas transited during 1997 –2002 (mil. m3) 16 000 14 000 12 000 10 000 8 000 6 000 4 000 1997 1998 1999 2000 2001 2002 May 18-24, 2002 Newark, New Jersey – Washington, DC, U.S.A. STATE ENERGY REGULATORY COMMISSION - BULGARIA 2. Market structure 2.1. The Position of “Bulgargas” on the market 2.2 Structure of the consumers 2.3 Distribution market May 18-24, 2002 Newark, New Jersey – Washington, DC, U.S.A. STATE ENERGY REGULATORY COMMISSION - BULGARIA 2.1.2.1. TheThe PositionPosition ofof “Bulgargas”“Bulgargas” onon thethe marketmarket z “Bulgargas” is a state owned vertically integrated company z Long term (2010) “take or pay” import agreement with “Gasprom” z The only gas supplier to the consumers and gas distribution companies in Bulgaria z Sale 97% of the gas on the market z Owner of transmission system, underground storage and part of distribution system May 18-24, 2002 Newark, New Jersey – Washington, DC, U.S.A. STATE ENERGY REGULATORY COMMISSION - BULGARIA 2.2.Structure2.2.Structure ofof thethe consumptionconsumption MAJOR CONSUMERS GROUPS YEAR 1996 1997 1998 1999 2000 2001 CONSUMER GROUP POWER 1 665 1 524 1 379 1 336 1 167 1 136 CHEMIKAL INDUSTRY 2 435 1 730 1 297 996 1 344 1 214 OTHER INDUSTRY 1 562 1 264 1 064 915 821 694 NONINDUSTRY 7 4 4 3 3 3 DSTRIBUTION COMPANIES627247748293 TOTAL 5 731 4 594 3 791 3 324 3 417 3 140 May 18-24, 2002 Newark, New Jersey – Washington, DC, U.S.A. MAJOR CONSUMERS GROUPS during 1997 –2001 (mil. m3) 2 500 2 000 1 500 1 000 500 0 1996 1997 1998 1999 2000 2001 POWER CHEMICAL INDUSTRY OTHER INDUSTRY NONINDUSTRAL DSTRIBUTION COMPANY May 18-24, 2002 Newark, New Jersey – Washington, DC, U.S.A. STATE ENERGY REGULATORY COMMISSION - BULGARIA 2.32.3 DistributionDistribution marketmarket z Insignificant share of market – 3% from annual consumption z Serve small industry, commercial and residential consumers z Potential gas market forecast at up to 6.6 bcm by 2010 of which 15% is residential/commercial demand May 18-24, 2002 Newark, New Jersey – Washington, DC, U.S.A. 3. Specific regulatory aspects in natural gas sector ¾ Licensing of “Bulgargaz” – vertically integrated company ¾ Licensing of private gas distribution companies ¾ Economic regulation of natural gas sector ¾ Access to the gas transmission and gas distribution systems May 18-24, 2002 Newark, New Jersey – Washington, DC, U.S.A. 3.1. Licensing of “Bulgargaz”– vertically integrated company ¾ License for transmission and storage of natural gas – operator of gas transmission system ¾ Import of natural gas, regularly supplies payment ¾ Connection of local gas distribution companies and new consumers ¾ Problems with non payments from consumers May 18-24, 2002 Newark, New Jersey – Washington, DC, U.S.A. 3.1. Licensing of “Bulgargaz”– vertically integrated company ¾ Reliability and technical condition of the transmission system ¾ Short term license for gas distribution to the specific clients ¾ License for gas transit, investments for increasing the capacity of the system May 18-24, 2002 Newark, New Jersey – Washington, DC, U.S.A. 3.2. Licensing of private gas distributions companies ¾ After 1999 with the new Energy Low the regime is changed - municipal concessions with regional licensing ¾ The Investors have a property raids on gas distribution system ¾ Issued 36 municipal regional licenses of the concessionary companies ¾ The Gas distribution companies have insignificant share of the market - 3% , in small municipalities with restricted May 18-24, 2002 consumption Newark, New Jersey – Washington, DC, U.S.A. 3.2. Licensing of private gas distributions companies ¾ Problems with investments and the property raids. Plans for development ¾ Price policy – the price for distribution is not covering the costs for the middle and small consumers Financial difficulties of the Municipalities ¾ Competition between the gas and the subsidized central heating and low price electricity May 18-24, 2002 Newark, New Jersey – Washington, DC, U.S.A. 3.2. Licensing of private gas distributions companies ¾ Lack of experience and standards. Problems with the gas companies management ¾ Need of simplification of the present procedures for the development of gas networks, connections and indoor installations May 18-24, 2002 Newark, New Jersey – Washington, DC, U.S.A. 3.3. Economical regulation of the gas sector ¾ Dated April 1, 2002 the State Energy Regulatory Commission confirms the gas prices of the licensed gas companies ¾ The prices are cost based ¾ The State Energy Regulatory Commission determines the rate of return of the gas companies’ capital and the regulatory period – 8% for the transmission company and 15% for the gas distribution companies May 18-24, 2002 Newark, New Jersey – Washington, DC, U.S.A. 3.3. Economical regulation of the gas sector ¾ Return of Investment is guaranteed ¾ Common price of the gas transmission company ¾ Regional prices of the gas distribution companies ¾ Normalization of Price levels and differentiation. Elimination of the cross- subsidizing between the consumers groups May 18-24, 2002 Newark, New Jersey – Washington, DC, U.S.A. 3.3. Economical regulation of the gas sector ¾ Cost analysis and increasing efficiency of the gas companies ¾ Competition with alternative fuels May 18-24, 2002 Newark, New Jersey – Washington, DC, U.S.A. 3.4. Access to the gas transmission and the gas distribution systems ¾ Adoption of the secondary legislation - regulated third party access to the gas transmission and distribution systems ¾ Steps to liberalization of the local natural gas market in compliance with European Directives ¾ Criteria determination for the eligible consumers – 80 mln. m3 annual consumption May 18-24, 2002 Newark, New Jersey – Washington, DC, U.S.A. 3.4. Access to the gas transmission and the gas distribution systems ¾ Market opening – 75% in relation with consumption structure ¾ Restricted access for the consumers with unsettled payments ¾ Guarantees for protection of the consumers’ interests – regulated transmission prices, market rules, State Energy Regulatory Commission control May 18-24, 2002 Newark, New Jersey – Washington, DC, U.S.A.