Transit to Germany

Energinet.dk has not yet sold any capacity for the 2012 gas year, ie from October 2012. Shippers are expected, however, to trans- port considerably less gas through Denmark next year due to the declining North Sea production.

A large part of the gas production in the Danish part of the North Sea has for several years been exported to the Netherlands and Germany. The gas to the Netherlands is exported offshore through the NOGAT pipe- line and thus not through Energinet.dk’s transmission network, whereas the gas to

64

Gas in Denmark - Energinet.dk

Germany enters Denmark via Nybro and is transported through the transmission network to Germany via Ellund. Exports to Germany thus contribute to ensuring profit- ability in the Danish gas network through the payment of transmission tariffs. As the North Sea production starts to decline, exports to Germany will decline as well. From October 2010, it became possible to physically import gas from Germany, and Denmark is expected to become a net im- porter of gas from Germany on an annual basis already in 2012.

As production decreases in the coming years, the distribution of the falling export volumes between the Netherlands and Germany will thus have a large impact on Energinet.dk’s transmission income. Energinet.dk expects ex- ports to the Netherlands to be discontinued, but whether or not exports to Germany will be discontinued as well depends on factors such as the commercial players’ gas agree- ments and the transport prices in the Danish, German and Dutch transmission networks and in the NOGAT pipeline. In this connec- tion it should be mentioned that DONG Energy has made agreements with Gazprom on the supply of gas to Denmark when Nord Stream is opened in 2012. This is expected

to cut exports to Germany and at the same time reduce gas supplies from the North Sea to Denmark.

The various alternatives for the coming years’ exports have a direct influence on the Danish transmission tariffs. Similarly, the future sale of capacity in the system has a substantial impact on tariffs. As shown in Figure 5-8, a drop in the capacity sold may have a significant effect on the tariff, caus- ing it to increase markedly. Similarly, an increase in the sale of capacity of around 200% of what is expected can keep tariffs at today’s level.

If the tariff increases too much in the coming months, this may trigger a negative spiral with reduced use of the system and thus considerably higher prices. The opposite is of course also possible.

5.6 Gas quality

In the last 25 years, the Danish gas market has been supplied exclusively with gas from the Danish part of the North Sea, but this changed earlier this year when Denmark began to import European gas from Germany.

Danish North Sea gas belongs to the group H of the second gas family and is character- ised by a highly uniform composition and thus a very uniform quality. Danish natural gas has always had a high Wobbe index compared to the gas in adjacent systems. This is due to the fact that Danish gas has a relatively high content of ethane, propane and butane, which are not extracted from the natural gas. In Norway, these intermedi- ate fractions are usually extracted and sold separately as LPG (Liquefied Petroleum Gas), for example, or used as raw materials or fuel gas.

Natural gas will still belong to group H of the second gas family following the estab- lishment of new supply routes. Customers will, however, receive gas of a different quality in Denmark. Similarly, they will also experience greater variation in gas quality. This applies whether or not future sup- plies will come from Norway, Germany, the Netherlands or Russia, as LNG or as a mixture of this from Germany. Following the decision to expand the infrastructure to Germany, the gas quality scenarios covering the period after 2013 will still be character- ised by German supplies.

Figure 5‑8 Impact of the actual sale of capacity on tariffs. Estimated capacity tariffs depending on the correctness of the capacity forecast, DKK/kWh/h/y (2011‑DKK)

Capacity reservations – 50% of expectations Capacity reservations – 70% of expectations Estimated capacity tariffs

Capacity reservations – 150% of expectations Capacity reservations – 200% of expectations

0 10 20 30 40 50 60 70 2014 2018 2022 2026 2030

65

5.6.1 Gas from Germany

via Ellund from 2013

Following the establishment of increased ca- pacity at the Danish-German border in 2013, German gas imports are expected, which, in Egtved, will be mixed with natural gas from the Danish part of the North Sea. Supplies from the two entry points, and thus the mix- ing ratio between North Sea gas and German gas, will depend on the commercial orders. The composition of the German gas will vary depending on the current supply conditions, and the gas is typically a mixture of indig- enous German gas, Norwegian, Dutch and Russian gas as well as biogas. The German gas is expected to have a considerably lower Wobbe index and calorific value as well as greater variation in these parameters than experienced by Danish gas consumers so far. Historically, the variation in the German gas is from 13.9 to 15.3 kWh/Nm3_{, which is}

also expected to be the variation range for future supplies from Germany to Denmark. Energinet.dk expects – based on the report “Nye gaskvaliteter – Dokumentation om

ændring af de danske krav til natur- gaskvaliteten ud fra et sikkerheds- og samfundsmæssigt grundlag” (New gas

qualities - Documentation for changing the Danish requirements for natural gas quality on a safety and social basis) - that the Danish

Wobbe index specification will be changed so that gas can be imported freely in terms of gas quality by the end of 2011.

As regards other gas quality parameters such as relative density, sulphur content and dew points, the imported gas will be within the limits set out in the Danish Gas Regulation and the Rules for Gas Transport.

66

Gas in Denmark - Energinet.dk

6.1 Status of the Ellund-

Egtved expansion

Pursuant to the Danish Act on Energinet.dk, the Danish Minister for Climate and Energy approved the establishment of installations to increase the transport capacity from the Danish-German border to Egtved in central Jutland. In letters of 29 January 2010 and 17 May 2010, the minister gave Energinet.dk permission to go ahead with both compres- sor station and pipeline looping. It was con- firmed finally in June 2011 that the precondi- tions for the approval were fulfilled and that the total project would be implemented. A compressor station will be constructed with the purpose of increasing gas pressure from the level at which gas is received from Germany to a pressure in the Danish gas transmission network which ensures that the required gas flow is maintained.

Furthermore, a 94 km gas transmission pipe- line will be constructed from the German border near Frøslev to Egtved. There is already a pipeline from Ellund/Frøslev to Egtved (24”), which is currently exporting gas from the North Sea to Germany. Capacity analyses have shown, however, that the ex- isting pipeline does not facilitate gas imports

in adequate volumes. It is therefore neces- sary to supplement the existing pipeline with a parallel pipeline (30”).

The construction of the compressor station determines the overall timetable. In 2010, a contract was made with a turnkey contrac- tor, and detailed design of the compressor station and the initial construction work were commenced in 2011. The compressor station will be ready for commissioning in autumn 2013.

In the beginning of 2011, the final design con- cept for the compressor station was drawn up. The entire facility will then be designed in detail throughout 2011. The preparatory con- struction work has been commenced at the site in Egtved where the compressor station will be constructed in 2011-13.

The pipeline from Frøslev to Egtved was de- signed in 2010-11. Tenders were invited for the construction work in June 2011 on the basis of the detailed design work. In 2011, archaeologi- cal investigations will be carried out along the entire pipeline. The gas pipeline itself will be constructed in 2012. In 2013, the pipeline will be connected to the existing gas transmis- sion network at selected line-valve stations

so that it can be commissioned together with the compressor station in autumn 2013. The Directorate of the Danish Working Environment Authority approves the con- struction of the systems, ensures that the requirements in the Danish working environ- ment legislation are complied with and is- sues the operating license.

The building authorities in Vejle Municipality issue the building license. The building li- cense relates to building-technical issues in relation to Danish building legislation for the service buildings for the compressor station. Below follows a description of the project’s two main infrastructure elements, ie the compressor station and the gas pipeline, as well as of the service facilities and valve ar- rangements aimed at supporting operations and ensuring a high safety level.

6.1.1 Compressor

station in Egtved

In February 2011, Vejle city council approved a local development plant for the Egtved area where the compressor station is to be constructed. The local development plan