1 allocation of baseline reduction in the substitution methodology draft presentation aimed for 11...
TRANSCRIPT
1
Allocation of Baseline Reduction in the Substitution Methodology
Draft Presentation aimed for 11th June Substitution Workstream
John BaldwinGas Strategies ConsultingA Division of Gas Strategies Group Ltd35 New Bridge StreetLondon EC4V 6BW
Tel: +44 (0)20 7332 9950 Fax: +44 (0)20 7332 9941 E-mail: [email protected] http://www.gas-strategies.com
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Purpose of this Presentation
To illustrate the actual impact of substitution on ASEPs with unsold capacity
To bring out issues associated with deciding which ASEPs will have their baseline reduced NGG’s 2007 methodology had ‘nearest’ ASEP as the rule, within
Zone first Aim is for NGG, Ofgem and Shippers to consider the
allocation question as part of process of developing the NGG Substitution Methodology
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Re-cap
Baseline consultation almost completed with Ofgem proposing Option 1A Transfer-trade mod in place Process underway to inform National Grid’s Substitution Methodology One issue that has not been discussed relates to the allocation criteria for
deciding which ASEP should give up capacity to a new or expanded ASEP
This was not
Identified as one of
the key Issues in
the 2007 discussions
and the Feb 2008
NGG Summary Report
and Discussion
Document
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Context (1) – Substitution Obligation
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Context (2) – Other Obligations
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Context (3) – UKCS Production
By 2011 UKCS production forecast to be around 50 BCM which is less than half the 108 BCM
in 2000 and so it can be expected that NTS capacity becomes available as this happens.
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Context (4) – Troll Project Abandoned
2007 10YS – Troll project taken out – 20
MCMD reduction
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Context (5) – Reduced Baselines
There have been material reductions in baselines at 3 ASEPs from the 2002-07 level to the proposed new baseline (Option 1A): Barrow (was 65.5 MCMD, reduced to 28.4 MCMD) Teesside (was 70 MCMD, reduced to 44 MCMD) Theddlethorpe (was 78 MCMD, reduced to 56 MCMD) Total reduction 85.1 MCMD
No other Baselines have been reduced
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Context (6) – Capacity Increases
The decline in UKCS has created space for gas from other sources with increases in entry capacity at Easington, Aldbrough, Isle of Grain, Milford Haven: Total new capacity at these 4 ASEPs of 202.1 MCMD Investment in any necessary incremental capacity underwritten by
shippers
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Allocation of Baseline Reduction
If capacity is required at an ASEP (new or existing) then NGG’s proposals in 2007 were for substitution to be from the nearest ASEP
We have looked at a number of potential ‘substitutions’ to understand the impact of this
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Background 1 - The Entry Zones
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Background 2 - Potential Increases in Entry Capacity
From this BERR slide, we can
select potential projects in each
zone to understand how substitution
could be implemented and its
possible impact on other ASEPs, both
in the same Entry Zone and out of
Zone
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Background 3 – Potential projects mapped by Zone
Five projects
identified by way of
Illustration, we can
look at each in turn
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Background 4 – Unsold capacity by zone
Based on
30th May
2008 capacity
sales update
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Background 5 – Basic Project Data
Dates and MCMD for projects based on
Public domain data and so Indicative only
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Clarification re “pipeline distance”
The 2007 Methodology says: The nearest ASEP will be determined according to pipeline
distance and is selected in preference to more distant ASEPs as this will create greatest interchangeability
What does pipeline distance mean?
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Substitution – illustrative projects
The next slides look at 5 potential new projects and discuss the possible substitution scenarios
They have been selected to help provide a range of scenarios so that shippers can understand how the methodology could be applied and the choices that exist NGG requested to provide feedback
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Whitehill (1)
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Whitehill (2)
If Whitehill passes NPV test, it may be able to access small amount of unsold capacity at Hatfield Moor
Next, may be able to access unsold capacity in other Zones: From NGG’s 2007 methodology, consider nearest ‘non zonal’ ASEPs Nearest ASEP is Theddlethorpe (33 miles), Teesside 70 miles
(Google earth, not pipeline distances) What would the Exchange rates be between?
Whitehill and Theddlethorpe Whitehill and Bacton Whitehill and all the ASEPs in the Northern triangle?
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Saltfleetby (1)
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Saltfleetby (2) If Saltfleetby passes NPV test, likely to be large amount of
unsold capacity at Theddlethorpe (assuming in same zone) Around 48 MCMD unsold, with no potential new flows identified by
NGG to increase utilisation
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Bletchingley (1)
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Bletchingley (2) If Bletchingley passes NPV test likely to be unsold capacity
at Bacton No other donor ASEP in zone Similar distance to Theddlethorpe (but not in SE Zone)
Around 86 MCMD unsold, but with potential flows that can use this capacity So, should Bacton baseline be reduced or Theddlethorpe?
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Baines (1)
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Baines (2)
Assuming that Barrow has sold out (eg Gateway), then there is likely to be unsold capacity in the Northern Triangle: St Fergus – 82 MCMD Teesside – 26 MCMD Glenmavis – 8 MCMD
NGG 2007 methodology would take up to the 26 MCMD from Teesside as the nearest ‘within zone’ substitution
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Baines (3)
Looking at 2007 10YS, by 2011
St Fergus could have flow as
High as 120 MCMD, Teesside
33MCMD, Glenmavis could be 9
MCMD
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Baines (4) - Issues
What about Partington which is closer geographically and has potentially 16.5 MCMD unsold?
Why not take from other Northern Triangle ASEPs which utilise the same infrastructure as Teesside (South of Teesside)?
1 to 1 exchange rate in Northern Zone for Transfer-Trade Why not take into account SO costs associated with different
ASEPs? Longer distance = higher opex (compressor fuel) and greater buy back risk
Why not take into account ‘spare’ capacity over possible gas flows?
Why not pro rata of unsold capacity in a zone?
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Portland (1)
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Portland (2)
If Portland passes NPV test, may be able to access unsold capacity in South West UK Zone
Avonmouth potentially has 13.5 MCMD unsold After that, is it Bacton or Dynevor Arms
What exchange rate for Dynevor to Portland and bacton to Portland? After Avonmouth and Bacton/Dynevor, what next?
Partington? Does reduced flows down West Midlands allow higher flows into NTS in
South West?
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Selection of donor ASEP – summary
This issue has not been debated yet, we need to understand the options and choices:
NGG’s 2007 methodology had ‘nearest’ ASEP as the rule, within Zone first
Nearest within zone appears arbitrary Abandonment of Troll project has major impact on NTS capacity
availability as St Fergus was forecast to be potentially fully utilised by 2011
Latest forecast has minimum of 30 MCMD spare Other Licence Obligations need to be considered such as
‘economic and efficient’ and ‘non discrimination’ which may mean that the ‘nearest’ methodology is not appropriate
We would like NGG, Ofgem and Shippers to consider this question