Gas system & actor description: The case of the Dutch gas system June 29, 2011 SPM 9541 November 2010 Aad Correljé 1
The Natural Gas Market Value chain Set up of regulatory and market system in the Netherlands Changes under market development Liberalization Dutch interests June 29, 2011 2 NAM
A value chain June 29, 2011 3
Characteristics of the value chain. Specific Lumpy Investment, Long lead times, high upfront cost Fixed v. variable cost Seasonal and daily patterns Long distance Scale Economies Capacity utilization Volume Risk Price Risk Essential facilities June 29, 2011 4
Integration and coordination of the gas value chain in the past Production: Oil Companies Long term TOP/DC Net Back contracts Transmission: National Joint Venture Operators Cost plus Storage: National Joint Ventures Cost plus Distribution: Public Local Municipal Firms Cost plus Retail trade: Oil parity pricing, market segmentation Long term planning and supply/demand coordination June 29, 2011 5
Bcm Natural gas in Netherlands 100 90 80 70 60 50 40 30 20 10 0 De Pous Lubbers Van Aardenne II Van Aardenne De Korte Wijers 1960 1970 1980 1990 2000 Groningen On-shore Off-shore Import Series5 Total supply June 29, 2011 6 A. Correlje
Transition: The 1960s Competing sources of energy Who gets what Role of the State (sheik-effect) Winners and losers June 29, 2011 7
June 29, 2011 8 SHELL, 1962
Shell versus Exxon: Segmented markets Gas for all domestic users (heating & cooking) Industrial premium markets (chemical, metallurgical, keramic) Market value (heating oil, fuel oil, coal) Progresively declining prices Control over production 70-90% state share June 29, 2011 9
Sector structure June 29, 2011 10 A. Correlje
Gasnet 64 en 68 June 29, 2011 11 Gasunie 1964/68
Tonnes Coalequivalent 140 Consumption 120 100 80 60 40 20 0 1937 1952 1957 1962 1967 1972 1977 1982 1987 1992 1996 June 29, 2011 Coal Oil Natural Gas Other 12 A. Correlje
Advantages No storage, no handling, nor dirt Easy control Wheater independent Production: < 1ct cm; utility: 6 ct; Consumer < 300 cubic: 25 ct: > 300: 20 ct > 600 cm. : 10 ct. Growth in Income, GDP and industry and housing boom June 29, 2011 13
1000 of millions cubic metres Gas use 60 50 40 30 Utilities Industry Elec. Prod. Export Inland sales 20 10 0 1960 1965 1970 1975 1980 1985 1990 1995 2000 June 29, 2011 14
billion cubic meter Reserves Growth 4500 4000 3500 3000 2500 2000 1500 1000 500 0 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 Cum. Use Gron. Cum. Use Terr. Cum. Use Tot. Gron. URR Tot. URR Tot. Remaining Res. June 29, 2011 15
Export June 29, 2011 16 Odell, P.R,1969 Natural gas in Western Europe; a case study in the economic geography of resources
1000 of millions cubic metres Export 60 50 40 30 20 Suisse Italy France Belgium Germany 10 0 1960 1965 1970 1975 1980 1985 1990 1995 2000 June 29, 2011 17 A. Correlje
1973/1974 oil crisis Security of supply, Club of Rome Reduction in consumption Stimulating small fields on-/off-shore Low cost Groningen marginal H- and L Gas: conversion, transmission, mix June 29, 2011 18
1000 of millions cubic metres Reduction in Consumption 100 90 80 70 60 50 40 30 20 10 0 1960 1965 1970 1975 1980 1985 1990 1995 2000 Utilities Industry Electricity Prod. Export June 29, 2011 19 Aad Correlje
Thousands of millions m3 Natural Gas Production 120 100 80 60 40 20 0 1960 1965 1970 1975 1980 1985 1990 1995 June 29, 2011 Off-shore On-shore 20
Stimulating small fields on-/off-shore June 29, 2011 21 Ruhrgas, 2005
Thousands of millions m3 Low cost Groningen marginal 100 90 80 70 60 50 40 30 20 10 0 1960 1965 1970 1975 1980 1985 1990 1995 2000 Groningen On-shore Off-shore Import June 29, 2011 22
June 29, 2011 23 Odell, P.R,1969 Natural gas in Western Europe; a case study in the economic geography of resources
June 29, 2011 24 Gasunie, 2001
EU Gas Imports, 2001 Total: 250,3 bcm Nigeria 2% UK 5% Other 10% Russia 27% Netherlands 17% Source: IEA Norway 19% Algeria 20% June 29, 2011 25
12000 Seasonal Variation 10000 8000 6000 4000 2000 June 29, 2011 26 0 A. Correlje Netherlands Norway Total Former Soviet Union Algeria Germany Libya
Summary: 1959-2000 Gasunie, NAM and the others Marketvalue = price alternatives (heating and fuel oil) Users do not pay more but certainly not less! State secures production in coordination with sales to avoid shortages and excesses State receives +/- 70% of the profits Market segmentation Sectoral and regional policy Small fields policy June 29, 2011 27