One type of natural gas differs from another: natural gas quality?

(163) The problem of the interchangeability of natural gas qualities is a major obstacle to synergy between transit and the provisioning of the national market. Up until now it has been possible for transit flows to be used operationally without any problem for the provisioning of the national market. However, the other way round is not always possible, chiefly on account of the restrictive quality requirements for the British market. The VTN2 project and the provisioning of the underground storage at Loenhout through the planned Wilsele-Loenhout pipeline are only useful for the Belgian market if the quality specifications for transit are in accordance with those of the national market. However, up until now this has not been the case, and thus puts at risk the effectiveness of the investments that have been decided on. This issue is examined in further detail here on account of its crucial importance.

(164) The CREG, like other regulatory bodies (Bundesnetzagentur in Germany, E-Control in Austria, etc.) is urging for a binding application of the EASEE gas standard concerning natural gas quality in the EU and therefore also in the UK. In the Fluxys transport network (H-gas), the natural gas quality on the VTN pipeline (and therefore also the Zeebrugge hub) is geared to the British quality, which differs from the EASEE gas standard. This means that the Belgian market can be supplied without any problem through the Zeebrugge hub and the VTN pipeline, but that conversely natural gas from other sources, especially LNG, cannot always be injected into this separate system. This is a manifest obstacle to network development and the liquidity of the market. If investments continue to be made on the basis of this separated system, we will get a distortion of the national network and all kinds of possible synergies will be lost.

(165) The margin within which the quality (GCV – gross calorific value) of H-gas can fluctuate was regulated for the first time in the main conditions governing transfer. It is laid down that for the transport network the quality of natural gas may fluctuate within the following limits [34.582 MJ/m³(n); 46.055 MJ/m³(n)]. However, it is still possible that the quality of transit gas may diverge from these provisions but any departure should of course not endanger the regulations for the transport network.

(166) When the VTN1 project was launched, it was contractually agreed with the first user (Wingas) (27/11/1996) that the natural gas quality on this connection could not

exceed the limit of 41.8 MJ/m³(n). Given that i) there was no regulation on the matter, and ii) Wingas acted as the first contracting party, it is difficult to call into question this contractual agreement for the duration of the contract in question. All parties that have entered into a contract for use of the VTN pipeline since then (Conoco, Gazexport, Thyssengas, etc.) thus knew of this “restrictive” provision originating in the first contract with Wingas. The market has therefore acted here, and there can barely be talk of any conflict in this start-up situation in which transit was targeted. For the term of the initial contract with Wingas the natural gas quality in the VTN pipeline meets the upper limit of 41.8 MJ/m³(n).

(167) It should be mentioned that the limit of 41.8 MJ/m³(n) is not imposed by the German regulations for their own market. EGT, which runs the TENP branch at Eynatten, for example, does not enforce compliance with the Wingas (WEDAL) limit. This contrasts, for example, with the Wobbe problem for the British market. This relates to Wobbe specifications that are not derived from contractual agreements but are imposed by the British regulations.

(168) However, it does not automatically follow on from this that the Zeebrugge hub should use the same upper limit as on the VTN pipeline, which is the case at the moment, as a result of which LNG, for example, cannot be physically traded on the hub just like that and Norwegian gas cannot always be injected into the VTN pipeline (in forward mode). The hub can be located at another point, whereby it is not the natural gas in the VTN pipeline that is the standard, but Norwegian and/or LNG if the problem of interchangeability of natural gas qualities continues to arise.

(169) However, this is not self-evident, for in that case no natural gas could be transferred to Germany on account of the specification agreed with Wingas. Of course the hub would become less interesting if transit to Germany were no longer possible (at least via the WEDAL). For example price arbitrage with Germany would be difficult, which would mean it would not be possible to smooth out higher natural gas prices in Germany.

(170) As long as the natural gas quality of the VTN pipeline remains the standard for the Zeebrugge hub, the Belgian market can continue to take off natural gas from the hub but there is no guarantee that natural gas can be traded for the Belgian market at the hub. This is a barrier for newcomers on the Belgian market because they do not have the guarantee of being able to offer their surpluses at the hub (cf. also barrier for the

creation of an intra-day market). It is clear that the current situation protects the German market from newcomers through Eynatten. It is possibly for this reason that the existing situation is being perpetuated for as long as possible by the parties concerned.

(171) The Wingas quality specification, 41.8 MJ/m³(n), is only important if the VTN pipeline is in forward mode. In reverse mode the specifications applicable to the Belgian transport network are not a problem. It also needs to be stated that as and when more Russian natural gas comes onto the European market³⁸, there will be a trend towards a lower energy content, on average, of the natural gas transported. This is because Russian natural gas represents fewer calories per m³ than for example Norwegian natural gas and LNG.

(172) The CREG asks Fluxys to give the necessary guarantees that the reinforcements of the transport network that have been decided on do not pose any problems as regards interchangeability of natural gas.

38 It is estimated that at the moment 6% of Belgian natural gas provisioning is covered, via the various different supply companies, by Russian supply contracts. As and when supply through Germany (see Eynatten interconnection), but also through the Netherlands (see Zelzate), increases, the share of Russian natural gas on the Belgian market will grow.