Operating UGS in today’s gas markets

Grigory Dyachenko – Gazprom Geotechnology LLC Leading specialist

1 Operating UGS in today’s gas markets

Gazprom gas reserves

Gazprom’s gas reserves:

35,4 trillion cubic meters

Gazprom’s share in world gas reserves

Gazprom’s share in Russian Federation gas reserves

17Independent manufacturers

Unallocated reserves

2 Operating UGS in today’s gas markets

Gazprom gas transmission system

The length of the gas transmission system in Russia totals 172,1 thousand kilometers. 254 compression stations with the aggregate capacity of gas compressor units equaling 46,7 thousand MW are used for gas transmission.

3

Gazprom gas storage facilitiesWGV,bcm

Withdrawal,mmcm/d

72,27 812,5

Operating UGS in today’s gas markets

4

Russian Federation UGS capacities developmentWorking gas capacity, bcmPotential maximum withdrawal, mmcm

69.017

72 72.018 72.098 72.184 72.27

83

727.8770.4 789.9 801.3 805.3 812.5

1000

0

200

400

600

800

1000

60

65

70

75

80

85

90

2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2028/29

mm

cm/d

bcm

Operating UGS in today’s gas markets

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Gazprom gas delivery to Europe

Gazprom Management Committee Directive No.5 dated January 27, 2011 “On building up Company’s UGS capacities abroad” envisages Company’s UGS capacities growth in foreign countries to achieving the active capacity of at least 5% of annual export supplies, with the priority of creating proprietary storage capacities.

Gazprom’s gas storage abroad is characterized by the following advantages:• Covering seasonal fluctuations in gas demand;• Improving reliability and continuity of gas export supplies,• Emerging option of the participation in spot gas markets,• Increasing gas export volume,• Increasing of gas supply reliability at the periods of peak gas demand (sharp cold snaps, planned repair works as well as

contingency situations at gas transportation system).

138.6158.6

178.3194.4 201.8

0

50

100

150

200

250

2010 2015 2016 2017 2018

bcm

Gas export volume Long-Term Supply Contracts prices and Hub prices

Operating UGS in today’s gas markets

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Costs comparisonSpecific costs for peak capacity development

Operating UGS in today’s gas markets

7.30%

35.10%

100%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%

Short-term gas storage rentals inEurope

Gas storage development Gas production development

% fo

r one

seas

on

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Gazprom’s North-West & Central Europe UGS demand & capacities

UGS Capacity,bcm

Withdrawal,mmcm/d

Bergermeer 1,85 26,0

Katharina 0,32 23,2

Rehden 0,50 10,0

Damborgice 0,26 4,5

Haidach 1,86 18,9

Total 4,79 82,6

Pipeline Capacity,bcm

5% securityof supply,

bcm

Yamal 33 1,65

Nord Stream 55 2,75

Nord Stream-2 55 2,75

Total 143 7,15

Capacities

Demand

Operating UGS in today’s gas markets

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Gazprom’s Southern Europe UGS demand

UGS Capacity,Bcm

Withdrawal,mmcm/d

Banatski Dvor 0,23 2,6

Pipeline Capacity,bcm

5% security of supply, bcm

TurkStream-1 15,75 0,79

TurkStream-2 15,75 0,79

Total 31 1,58

Capacities Demand

Operating UGS in today’s gas markets

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Eastern Gas Program PJSC Gazprom

Operating UGS in today’s gas markets

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UGS market failures in EuropeTTF summer-winter spreads

European storage volume evolution

Source: Analysis of IEA and GIE data 2006-2016. Pöyry analysis (2017)

Source: Poyry, ICIS Heren data (2017) Source: woodmackenzie (2017)

Operating UGS in today’s gas markets

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Principles to access storage capacity in Europe

Operating UGS in today’s gas markets

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Strategic pipeline & UGS as an example of unified gas supply system in USA

Transco’s System - Generally System Peak Design Capacity: 308 MMcm/day Seasonal Storage: 5,6 BcmSupply Areas: Gulf Coast, Mid-Continent, Appalachia Market Areas: Southeast, Mid-Atlantic and Northeastern states Miles of Pipeline: 10,200 miles Compressor Stations: 56Gas storage facilities: Eminence, Washington…

Successfully usage of underground storage to maximize throughput on its pipeline and to respond to demand variability.

Source – Watson M., Steptoe & Johnson LLP, «Successfully Maximizing Storage Use –A Case Study of Transcontinental Gas Pipe Line Company, LLC»

Transco uses the storage assets, as well as pipeline capacity it has reserved to serve the overall needs of the system and operates them on an integrated basis.

GULFSTREAM

Operating UGS in today’s gas markets

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Gas storages in China

UGS - Depleted field

UGS - Salt cavern

LNG terminal

Operating UGS in today’s gas markets

UGS Developed by Gazprom

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UGS and “low carbon economy”

In case of injection of “GREEN” gas in UGS (porous media) the following detrimental reactions are expected:- Sulphur precipitation in valves;- Porous collectors blocking;- Minerals transformation and precipitation, e.g. Fe2+ Fe3+;- Sulphur reduction and deposition;- Corrosion intensification.

Operating UGS in today’s gas markets

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“Correct” operation of gas storage

Operating UGS in today’s gas markets

• Price should include supply flexibility, security of supply & infrastructure optimization• UGS market should fit both consumers & investors

“Unbundling” of gas production, transportation and storage business

Third party access

“Green gas”

“Big”Transmission

systems

“Small”Distribution

systems

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Thank You for your attention!