GAS INTERCONNECTION POLAND LITHUANIA (GIPL) STATUS AND POTENTIAL IMPACT ON THE BALTIC STATES MARKET

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1 GAS INTERCONNECTION POLAND LITHUANIA (GIPL) STATUS AND POTENTIAL IMPACT ON THE BALTIC STATES MARKET Tartu, 17 April 2018

2 GIPL POLISH SECTION GIPL pipeline (PL side) General technical parameters DN700 MOP 8,4 MPa Start Point: CS Hołowczyce Commissioning: 2021 Northern Section PL LT bcm/y, 275 tcm/h Southern Section LT PL up to 1.9 bcm/y

3 GIPL POLISH SECTION Milestones schedule Preinvestment steps Milestone Route variants defined Agreement for Basic and Detailed Engineering Environmental decision Localisation decision Building permission obtained ongoing ongoing ongoing

4 GIPL FINAL INVESTMENT DECISION ON POLISH SIDE REQUIREMENTS Inter TSO agreement Connection Agreement Final Investment Decision April 2018 April 2018 May 2018

bcm/y NATURAL GAS MARKET IN THE CEE & BALTIC REGIONS DEMAND FORECASTS UNTIL 2035 Current gas demand in the CEE and Baltic regions amounts for approx.

axis) Source: ENTSOG MAJOR GROWTH FACTORS Enhanced competitiveness vis-a-vis other sources in the energy market Climate and environmental

5 bcm/y NATURAL GAS MARKET IN THE CEE & BALTIC REGIONS DEMAND FORECASTS UNTIL 2035 Current gas demand in the CEE and Baltic regions amounts for approx. 81 bcm/y Demand expected to increase up to 91 bcm/y CEE&Baltic (left axis) NW (right axis) Source: ENTSOG MAJOR GROWTH FACTORS Enhanced competitiveness vis-a-vis other sources in the energy market Climate and environmental considerations switch to lower emitting sources Natural gas in the power generation and heating sector Transport and shipping sector (LNG as an alternative fuel)

7 bcm/y towards PL Project role: integration of the gas markets by creating a large transportation corridor between both countries POLAND UKRAINE INTERCONNECTION: Capacity: 5 bcm/y towards UA, 5

6 CREATING A REGIONAL NATURAL GAS MARKET POLAND LITHUANIA INTERCONNECTION: Capacity: 2.4 bcm/y towards LT, 1.9 bcm/y towards PL Project role: integration of the isolated gas markets in the East Baltic region, diversification of supply POLAND SLOVAKIA INTERCONNECTION: Capacity: 4.7 bcm/y towards SK, 5.7 bcm/y towards PL Project role: integration of the gas markets by creating a large transportation corridor between both countries POLAND UKRAINE INTERCONNECTION: Capacity: 5 bcm/y towards UA, 5 bcm/y towards PL Project role: connection of Poland's and Ukraine's systems to diversify gas supplies for Ukraine and further integrate transmission networks and markets in Eastern Europe POLAND CZECH REPUBLIC INTERCONNECTION: Capacity: 5 bcm/y towards CZ, 6,5 bcm/y towards PL Project role: integration of the gas markets by creating a large transportation corridor between both countries

NORTHERN GATEWAY PROJECT THE ASSUMPTIONS: Diversification Gas-to-gas competition Flexible and efficient gas infrastructure Regional gas market LNG TERMINAL IN ŚWINOUJŚCIE: Up and running since 2016 5

7 NORTHERN GATEWAY PROJECT THE ASSUMPTIONS: Diversification Gas-to-gas competition Flexible and efficient gas infrastructure Regional gas market LNG TERMINAL IN ŚWINOUJŚCIE: Up and running since bcm/y of regas capacities + truck loading Extension up to 7,5 bcm/y + other small scale services NO-DK-PL PROJECT: Direct connection to Norwegian deposits for the CEE region Capacity up to 10 bcm/y Open season in 2017 Commissioning in 2022 LNG terminal in Świnoujście NO-DK-PL project

capacities Transmission system* Technical

current outlook 2022 completion of the N-S

import import capacities 25,9 bcm 52,9 bcm *

8 DEVELOPMENT OF THE POLISH SYSTEM before the Russian-Ukrainian crisis 2015 infrastructure development underway Transmission system Technical import capacities Transmission system* Technical import capacities 11,6 bcm 17,6 bcm 2017 current outlook 2022 completion of the N-S corridor Transmission system* Technical import capacities Transmission system* Technical import capacities 25,9 bcm 52,9 bcm * - infrastructure marked in red - completed projects

9 IMPLEMENTATIO N OF EU NETWORK CODES MAIN GOALS TRA Guidelines CMP Guidelines CAM Network Code* Balancing Network Code Interoperability Network Code Tariff Network Code effective access to the system and transparency requirements to facilitate development of competition and efficient use of technical capacity to define: harmonised capacity allocation mechanisms, standardised capacity products and incremental capacity to facilitate cross-border gas trade and further development of competitive and efficient gas wholesale markets in Europe integration of markets by advancing operational and technical interoperability between systems to ensure efficient gas trading and competition based on cost-reflective tariffs that give incentives to invest Main provisions of applicable network codes and guidelines are already implemented in Poland Network Code development process by ENTSOG Applicability of the Network Code * - CAM Network Code amended as of March 2017

10 CAPACITY ALLOCATION PLATFORM AS MARKET INTEGRATION FACILITA TOR Gas exchange CAM NC Capacity allocation procedures Change in the flows patterns 3rd Energy Package gas network codes GSA Platform Great Solution for Auctioning Efficient; User friendly; Cost effective; Flexible;

11 AUCTIONING PROCESS CAM NC VIA GSA PLATFORM AUCTION PRIMARY MARKET PRODUCTS SECONDARY MARKET POINTS 1 Ascending clock auction yearly quarterly monthly Over-the-counter (OTC) First come, first served (FCFS) Interconnection points (IPs) 2 Uniform-price auction day-ahead Call for orders (CFO) within-day

12 TEST ENVIRONMENT (For interested TSOs, NRAs, Shippers):

13 THANK YOU FOR YOUR ATTENTION

Policy and regulatory framework: what are the next challenges to tackle?

Policy and regulatory framework: what are the next challenges to tackle? Alberto Pototschnig Director GIE Annual Conference Venice, TITRE 23 May 2013 Achieving the Internal Gas Market by 2014 (and beyond)