Regulatory Perspectives in Developing LNG Infrastructure

wwwwwwwwwwww. . . . erranet.orgerranet.orgerranet.orgerranet.org

Regulatory Perspectives in Regulatory Perspectives in Regulatory Perspectives in Regulatory Perspectives in

Developing LNG InfrastructureDeveloping LNG InfrastructureDeveloping LNG InfrastructureDeveloping LNG Infrastructure

Gülefşan DemirbaşGülefşan DemirbaşGülefşan DemirbaşGülefşan Demirbaş

EMRA/ICEREMRA/ICEREMRA/ICEREMRA/ICER, , , , TurkeyTurkeyTurkeyTurkey

16th ERRA 16th ERRA 16th ERRA 16th ERRA EnergyEnergyEnergyEnergy InvestmentInvestmentInvestmentInvestment and and and and RegulationRegulationRegulationRegulation ConferenceConferenceConferenceConference

SeptemberSeptemberSeptemberSeptember 25252525----26262626, 201, 201, 201, 2017 7 7 7 •••• AstanaAstanaAstanaAstana, , , , KazakhstanKazakhstanKazakhstanKazakhstan 2

BackgroundBackgroundBackgroundBackground

• ICER-IGU Joint Study

• to take a picture of different regulatory choices;

• to analyze different structures in related

investment regimes;

• to provide good regulatory practices

• A Case Study: Regulatory Perspectıves in

Developıng Turkish LNG Infrastructure



Global Gas DynamicsGlobal Gas DynamicsGlobal Gas DynamicsGlobal Gas Dynamics

Global Gas Trade by ExporterGlobal Gas Trade by ExporterGlobal Gas Trade by ExporterGlobal Gas Trade by ExporterGlobal Gas DemandGlobal Gas DemandGlobal Gas DemandGlobal Gas Demand

Source: IEA



LNG: LNG: LNG: LNG: GrowingGrowingGrowingGrowing SourceSourceSourceSource

Global Regasification CapacityGlobal Regasification CapacityGlobal Regasification CapacityGlobal Regasification Capacity

Source: IEA

FSRU FSRU FSRU FSRU CapacityCapacityCapacityCapacity



Turkish Gas Turkish Gas Turkish Gas Turkish Gas & & & & LNGLNGLNGLNG MarketMarketMarketMarket

2016 Outlook2016 Outlook2016 Outlook2016 Outlook



Legal FrameworkLegal FrameworkLegal FrameworkLegal Framework

• Free market entrance thru licensing.

• Legal & account unbundling.

• Regulated TPA regime.

• Semi-liberalization of gas imports.

• Gas release program.

• Static precautions in terms of

limiting market share.

• Non-discriminatory conduct

between domestic and foreign

investors.

LNG

Terminals



Developing Regulatory Framework for LNGDeveloping Regulatory Framework for LNGDeveloping Regulatory Framework for LNGDeveloping Regulatory Framework for LNG

• Liberalizing the gas import regime.

• Introduction of spot LNG into legal texts.

• Attempts for legally defining LNG as a distinct market activity.

• Contract releases.

• Adoption of Basic Usage Principles and Procedures.

• Introduction of FSRUs.

• Developing rules for Organized Natural Gas Wholesale Market.



Basic Usage Principles and ProceduresBasic Usage Principles and ProceduresBasic Usage Principles and ProceduresBasic Usage Principles and Procedures

• Regulated TPA

• Pro-rata capacity allocations on a yearly basis.

• Possibility for inventory transfers.



Growing Growing Growing Growing GasGasGasGas MarketMarketMarketMarket vsvsvsvs LNGLNGLNGLNG

14,614,614,614,616,116,116,116,1 17,317,317,317,3

20,820,820,820,8 21,821,821,821,8

26,626,626,626,6 30,230,230,230,2

35,835,835,835,837,437,437,437,4

35,935,935,935,938383838

43,943,943,943,945,945,945,945,9 45,345,345,345,3

49,349,349,349,3 48,448,448,448,446,446,446,446,4

32,00%32,00%32,00%32,00% 32,50%32,50%32,50%32,50%

30,40%30,40%30,40%30,40%

23,60%23,60%23,60%23,60%

19,30%19,30%19,30%19,30%18,10%18,10%18,10%18,10% 17,60%17,60%17,60%17,60%

16,10%16,10%16,10%16,10%14,70%14,70%14,70%14,70%

17,20%17,20%17,20%17,20%21,50%21,50%21,50%21,50%

14,80%14,80%14,80%14,80%

17,10%17,10%17,10%17,10%

13,40%13,40%13,40%13,40%14,80%14,80%14,80%14,80%

15,80%15,80%15,80%15,80% 16,50%16,50%16,50%16,50%

0,00%

5,00%

10,00%

15,00%

20,00%

25,00%

30,00%

35,00%

0

10

20

30

40

50

60

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Total Imports (bcm) LNG Share (%)



Turkey’sTurkey’sTurkey’sTurkey’s FSRU FSRU FSRU FSRU PracticePracticePracticePractice

ProsProsProsPros ConsConsConsCons

LesserLesserLesserLesser environmentalenvironmentalenvironmentalenvironmental impactimpactimpactimpact ChallengesChallengesChallengesChallenges ofofofof havinghavinghavinghaving allallallall thethethethe facilitiesfacilitiesfacilitiesfacilities includingincludingincludingincluding FMS’sFMS’sFMS’sFMS’s onononon----

boardboardboardboard

SignificantlySignificantlySignificantlySignificantly shortershortershortershorter timetimetimetime neededneededneededneeded totototo startstartstartstart operationoperationoperationoperation ((((1111 totototo

1111,,,,5555 yearsyearsyearsyears comparedcomparedcomparedcompared totototo 4444----5555 yearsyearsyearsyears forforforfor onshoreonshoreonshoreonshore LNGLNGLNGLNG

terminalterminalterminalterminal))))

OperationalOperationalOperationalOperational difficulties,difficulties,difficulties,difficulties, suchsuchsuchsuch asasasas unpredictableunpredictableunpredictableunpredictable seaseaseasea

movementsmovementsmovementsmovements duringduringduringduring offloadingoffloadingoffloadingoffloading

SufferingSufferingSufferingSuffering lesslesslessless forforforfor NIMBYNIMBYNIMBYNIMBY (not(not(not(not inininin mymymymy backbackbackback yard)yard)yard)yard) syndromessyndromessyndromessyndromes DifferentDifferentDifferentDifferent structurestructurestructurestructure ofofofof operationaloperationaloperationaloperational costscostscostscosts

AbilityAbilityAbilityAbility totototo bebebebe relocatedrelocatedrelocatedrelocated accordingaccordingaccordingaccording totototo thethethethe demanddemanddemanddemand

LessLessLessLess startstartstartstart----upupupup costcostcostcost



Tariffs Applicable to FSRUs in TurkeyTariffs Applicable to FSRUs in TurkeyTariffs Applicable to FSRUs in TurkeyTariffs Applicable to FSRUs in Turkey

• Tariff modelTariff modelTariff modelTariff model: Revenue cap

• Return based on FSRU Rental Expenses and LineReturn based on FSRU Rental Expenses and LineReturn based on FSRU Rental Expenses and LineReturn based on FSRU Rental Expenses and Line----PackPackPackPack: Charter expenditures

are included in the asset base, but not depreciated

• PricingPricingPricingPricing: Methodology may consider costs incurred by the services &cash-flow

• Tariff periodTariff periodTariff periodTariff period: 3 to 10 years

• Regulatory DepreciationRegulatory DepreciationRegulatory DepreciationRegulatory Depreciation: 5 to 22 years

• DiscountsDiscountsDiscountsDiscounts: No

• WACCWACCWACCWACC: 10%

• Tariff revisionsTariff revisionsTariff revisionsTariff revisions: Deviations exceeding 10% of asset base, non-controllable

OPEX



Prospects for Improving Turkish LNG MarketProspects for Improving Turkish LNG MarketProspects for Improving Turkish LNG MarketProspects for Improving Turkish LNG Market

• Standardization & simplification of the Usage

Procedures and Principles of the LNG terminals & FSRUs

• Improvement & standardization of web-based capacity

booking & nomination platforms of the LNG terminals

• Adoption of TPA exemptions and open season practices

• Building of LNG liquefaction facilities & increasing

storage capacity

• Further developing competitive market

13wwwwwwwwwwww. . . . erranet.orgerranet.orgerranet.orgerranet.org

W

THANK YOU FOR YOUR ATTENTION!THANK YOU FOR YOUR ATTENTION!THANK YOU FOR YOUR ATTENTION!THANK YOU FOR YOUR ATTENTION!

[email protected]@[email protected]@epdk.org.tr

www.epdk.org.trwww.epdk.org.trwww.epdk.org.trwww.epdk.org.tr / / / / www.icerwww.icerwww.icerwww.icer----regulators.netregulators.netregulators.netregulators.net

Regulatory Perspectives in Developing LNG Infrastructure

Documents

Transcript of Regulatory Perspectives in Developing LNG Infrastructure