Results of network operations in the Netherlands and Germany

Gas transport results

Our gas transport and infrastructure activities are at the heart of our strategy, and we carry out these activities as efficiently as possible. We take care of the development of the gas transport network and ensure that it is functioning well. We do this by guaranteeing transport security and offering relevant services to our customers. Safety, reliability, sustainability and cost-efficiency take priority here.

Transport security
Transporting gas safely and reliably is one of our key result areas. A disruption in gas transport is a seldom occurrence in our network. By managing our network well and by properly managing and maintaining our infrastructure, we create optimum conditions for a high transport security.

The gas flows going through our network are destined not only for the domestic markets in the Netherlands, but also for the countries surrounding us, such as Germany, Belgium, France and the United Kingdom. In this way, we also contribute to the transport security in north-western Europe.

We achieved a high degree of transport security in 2017. There was one brief disruption in the gas supply to an industrial customer. We investigated the cause of this transport disruption and concluded that the procedures are adequate and that the particular disruption was due to human error.

No transport disruptions occurred in the German network.

Fractional decrease in transported gas in the Netherlands
The total volume of natural gas transported in the Netherlands in 2017 decreased by 1.2%, while the average temperature was 0.3°C higher. In 2017, we transported 960 TWh (98.2 billion m3) of gas through our networks for our customers for the benefit of end users in the Netherlands and abroad. That was 971 TWh (99.4 billion m3) in 2016. This was caused by various shifts. Domestic use remained virtually the same, transport to fill natural gas storage facilities (in the Netherlands and abroad) was somewhat higher and transport to other countries somewhat lower. Broken down by gas type, the transport of high-calorific gas was virtually the same and the transport of low-calorific gas was somewhat lower.

Energy costs were higher in 2017 than in 2016. The increase in costs was mainly due to higher gas and electricity prices, higher conversion costs and higher compression costs on account of higher imports of Norwegian gas.

More quality conversion
To mitigate the consequences of the reduced gas production from the Groningen gas field, the use of our quality conversion capacity further increased in 2017. Through quality conversion, high-calorific H-gas is mixed with nitrogen and converted into a quality that is similar to that of low-calorific G-gas. This enabled us to continue to meet the demand for G-gas. The volume of converted H-gas increased from 258 TWh in 2016 to 286 TWh in 2017.

Slight decrease in gas transported in Germany
In Germany, Gasunie Deutschland’s total transported volume in 2017 was 253 TWh (2016: 265 TWh), a development primarily caused by the ongoing downward trend in the import of North Sea gas volumes and the utilisation of the Nord Stream entry point in Greifswald, with a capacity of approximately 88% (2016: 90%). The capacity bookings at the Emden (Norway) and Oude Statenzijl (the Netherlands) border points were significantly lower than expected. During the summer months, demand on the German L-gas market was almost entirely satisfied by domestic production and demand on the H-gas market was largely satisfied by gas from Russia. The gas storage locations in Gasunie Deutschland’s market area were about 90% filled (L-gas: 95%) at the start of the 2017/18 winter period.

Transported gas volume (in TWh) 2013 2014 2015 2016 2017
Netherlands 1,131  976  926  971  960 
Germany 234  257  244  265  253 
Total 1,365  1,233  1,170  1,236  1,213 

The trend that shippers in Germany particularly tend to make short-term capacity bookings at border points, as is the case in the Netherlands, continued in 2017. Neither the price differentiation for short-term bookings (to promote longer-term bookings), nor the significantly lower discount for interruptible capacity have led to any noticeable change in shippers’ booking behaviour.
BNetzA had imposed a change in the rate calculation method, which would come into effect on 1 January 2018. This method was supposed to improve the booking situation at Gasunie Deutschland’s border points, as it would lead to a uniform entry rate for the entire market area. The new uniform entry rates, effective from 1 January 2018, were calculated and published in August 2017 in accordance with the BNetzA HoKoWä decision. However, based on a decision by the Düsseldorf Higher Regional Court (OLG Düsseldorf), the German regulator had to revoke the decision and the rates calculated by Gasunie Deutschland using the previous method. Due to the declining level of bookings, which results in a substantially lower capacity forecast for 2018, the 2018 rates will clearly rise.

Investments in the Netherlands

Further optimising the replacement programme
We continued the multi-year replacement programme for valves, metering and regulating stations and gas receiving stations in 2017. This also applies for the examination of the condition of the parts released. The programme was adjusted based on this examination because certain parts of it proved to be no longer necessary from a risk perspective. This adjustment applies particularly for valves, where the rate of replacement is being reduced by one-third from 2020 onwards to 100 per year. This yields an investment reduction of approximately € 20 million per year.

It was already decided in 2016 that, based on risk considerations, the preventive renovation of gas receiving stations would stop after 2020. Further to this, the decision has now been made that in 2019 and 2020, only those few stations for which agreements have already been made with customers will be fully renovated. This puts the emphasis at gas receiving stations on corrective maintenance instead of large-scale renovation. Up to the end of 2020, this yields an investment reduction of approximately € 30 million in total.

In relation to metering and regulating stations, an investigation was started into the risk effectiveness of the current renovation programme.

An analysis of external corrosion on the Regional Transport Pipeline Network (RTL) demonstrated that the risk of pipeline fracture resulting from external corrosion is negligible. The RTL pipeline inspection programme in force was therefore replaced with a new programme to further improve cathodic protection. This represents a shift from inspection to prevention and this measure produces a net cost reduction of € 5 million per year.

The way our infrastructure is used is changing. This is because the share of renewable sources such as wind and solar energy, and of gases such as green gas and hydrogen, is expected to grow considerably, while demand for natural gas is falling. On top of that, gas flows are changing, with less gas extracted from the Groningen gas field and more coming from foreign sources.

All of this has consequences for the use of our infrastructure. We are constantly looking into how we can best facilitate these changes and what this means for the use of our network. Since under current conditions, the gas transport to end users can be carried out in the coming years even without the use of all compressor stations, we have temporarily decommissioned the Schinnen and Oldeboorn compressor stations. We have also developed similar plans for the compressor stations at Ommen (for the G-Gas parts) and Alphen, with possible shut-downs in 2020 and 2024. This defers replacement investments and prevents operating costs, but we will keep these stations available for re-opening.

A new operating system for our gas transport network
In 2015, we started the Jason programme to replace the operating system of our gas transport network. The new operating system allows us to accurately monitor and predict the transport flows better than before and supports our dispatchers as well as possible in taking decisions. It also makes it possible to implement new functionality for monitoring transport security and cost reductions in gas transport. The Jason programme is nearing completion. Despite its size and complexity, we are still on schedule to put the system into operation in spring 2018. It is also expected that the Jason project will be completed within budget.

Investments in Germany

All Integrated Open Seasons projects have now been completed and are operational. The remaining outstanding items will be finished by the end of 2018.

In 2017, Gasunie Deutschland received three applications for new network connections: an application for an LNG terminal near Hamburg, a request for an increase in the transport capacity to the Volkswagen power station in Wolfsburg and an application for the injection of hydrogen into the Deudan pipeline in Schleswig-Holstein. If the projects go ahead, the LNG project and the expansion of the Volkswagen power station represent a significant expansion of Gasunie Deutschland's existing network. Both projects are included in the upcoming 2018 Netzentwicklungsplan (NEP) process (national plan for network development).
 Although the injection of hydrogen is a small-scale project, it will be the first step towards making this technology an example for similar initiatives to follow.

Gasunie has entered into an agreement with German gas transport network operators Gascade, ONTRAS and Fluxys for the acquisition of a 16.5% share in the EUGAL pipeline project. Participation in this project constitutes expansion of Gasunie Deutschland’s transport capacity, bolstering Gasunie’s position in international transit flows. For more information, see ‘Business development results’.

Other important results in the Netherlands

Advice to the Ministry of Economic Affairs and Climate
In 2017, GTS advised the Ministry of Economic Affairs with regard to the government's approval decree on gas extraction in Groningen. We stated which volume is required from the Groningen gas field to guarantee the security of supply of L-gas within the Netherlands, Germany, Belgium and France in the gas years 2017 to 2020 (October 2016 to October 2020).

We also reported to the Ministry of Economic Affairs and Climate on supply and demand for low-calorific gas until the year 2030. This assumes an annual production from the Groningen gas field of 21.6 billion cubic metres.

In 2018, at the Ministry’s request in response to the Zeerijp earthquake on 8 January 2018, GTS carried out a security of supply analysis, in which we considered the potential impact of a lower extraction rate in Groningen on the security of supply. In addition, GTS conducted a scenario study in which we advised the Ministry on how, from the perspective of security of supply, gas extraction in Groningen can be reduced as quickly as possible to an initial target of 12 billion cubic metres per year. One of the key measures in this advisory report is the construction of a new nitrogen installation at Zuidbroek. The proposed new nitrogen installation will yield a reduction of approximately 7 billion cubic metres of Groningen gas annually (assuming a cold year). This would enable the level of 12 billion cubic metres to be achieved immediately after commissioning of the plant in early 2022.

LNG Peakshaver now part of GTS
LNG Peakshaver became part of the GTS network on 1 January 2017. Peakshaver is an LNG installation on the Maasvlakte that can be used when extra natural gas is needed for small consumers on days when the temperature dips well below freezing. The transfer to GTS took place as a legal merger, so the Peakshaver installation is now entirely at the disposal of GTS. This merger was instigated by the changing market for G-gas following the decline in Groningen production. These changes mean that Peakshaver, given its location and transport-supporting function, has become invaluable to GTS. It was therefore decided to make Peakshaver part of GTS, as a result of which GTS has become directly responsible for the asset management and operational management.

Merger of GTS and GGS
The new method decision for 2017-2021 has led to new agreements between ACM, market parties and GTS. One of these agreements is that GTS will reverse the split, and continue as the national network operator for both the main transport network (HTL) and the regional transport network (RTL). The continuance of GGS B.V. as an independent corporate entity therefore has no added value. Consequently, a decision has been made to merge GTS B.V. with GGS B.V. as of 2 January 2018.

Other important results in Germany

jordgasTransport GmbH
In December 2016, Gasunie Deutschland and Open Grid Europe GmbH (OGE) jointly acquired the German network operator jordgasTransport GmbH (JGT) from Statoil. JGT offers transport services through the NETRA pipeline connection, a joint venture of JGT, Gasunie Deutschland and OGE. The additional capacity perfectly complements Gasunie Deutschland’s existing portfolio and supports diversification of the import alternatives in Germany.

The shift of the transport activities from JGT to Gasunie Deutschland and OGE was put in motion in 2017. Transfer of the activities started at the beginning of 2018 and JGT no longer employs any personnel.

L-gas conversion projects
Due to declining production of low-calorific gas (L-gas) in both Germany and the Netherlands, the end-user installations in the GASPOOL market area must be made suitable for high-calorific H-gas. Gasunie Deutschland is proactively organising this conversion in order to guarantee ongoing optimum utilisation of its gas transport network and so that it can continue to safeguard transport security with a planned transition. In 2017, the conversion of the company (SW Stadtwerke) Nienburg, SW Neustadt, SW Achim, parts of Avacon Hochdrucknetz, parts of SW Bremen and various industrial customers was completed.

The next conversion projects have already been announced, and the relevant agreements with the adjacent network operators have been entered into, in line with the German network development plan (NEP)/Implementation Plan (USP).

Developing our customer organisation

As a service organisation, we aim to further develop our service provision by staying in touch with the market. We highly value the insight into developments in the market that our customers and other stakeholders share with us during various contact moments, especially now, with the gas market on the verge of a new era: the energy transition, a period in which natural gas will take on a different role, as it helps us to better align our services with their needs. We are therefore intensifying the interaction with market parties.

Talking to customers
Our products and services must enable our customers to conduct their business. We seek out dialogue with customers through customer days, market consultations and other occasions. Apart from two customer days, we organised several market consultations over the last year, for example concerning the Balgzand Bacton Line (BBL) integration in the TTF market area, the network development plan (NOP), the introduction of Virtual Interconnection Points (VIPs) and the implementation of the network code on harmonised transmission tariff structures for gas (NC TAR). We intend to actively continue dialogue with our customers in 2018.

Moreover, in 2017 we exchanged ideas with the various representative organisations regarding the energy transition and its consequences for the Dutch gas market. This resulted in a joint stakeholder consultation on the following topic: the development of the Dutch gas market. This creates a platform for joint initiation and encouragement of new developments, and subsequently joint steering towards the desired outcome.

Customer satisfaction survey at GTS
We regularly review our performance, for instance by means of a customer satisfaction survey at GTS. In 2016 shippers and industrial customers rated GTS with an 8.0 and a 7.7 out of 10 respectively. In 2017, GTS used the 2016 survey and discussions with our customers to tailor the package of products and services to customer needs as much possible. The effects of new developments such as the market integration between GTS and BBL will largely be felt by GTS customers in 2018. GTS has therefore decided to hold the next customer satisfaction survey at the end of 2018.

Complaints procedure
In the event of questions or complaints, shippers can contact the Customer Desk, and industrial customers can contact the Industry Desk. A specialist team will then help to solve the issue. In this way, GTS provides good accessibility and specialist contact points.

We try to process complaints we receive as quickly as possible, and to the satisfaction of all parties involved. In 2017, we received and processed 2 complaints from shippers and 1 complaint from an industrial connected party, compared with 3 complaints from shippers and 3 complaints from industrial connected parties in 2016.

Developments in the market

TTF (gas trading platform in the Netherlands)
Over the past few years, the Dutch virtual gas trading platform TTF (Title Transfer Facility) has grown into one of the most prominent liquid gas hubs in Europe. Among other things, this is reflected in the Tradability Index of ICIS Heren, in which TTF was the only gas trading platform to achieve the maximum score for shippers’ ease of buying or selling gas (for the 10th time including 2017).

Less gas was traded in 2017 than in 2016 in north-western Europe. The decline in gas trading was due to lower volatility and a more stable oil price. Another cause for lower additional trading in 2017 than in 2016 was the persistent flow of news about Groningen and the English storage facility at Rough. As a result, TTF also saw less gas being traded in the 2017 calendar year (20,962 TWh) than in the previous year (21,468 TWh). Of the top three north-west European gas trading platforms, TTF experienced the smallest percentage decline in traded volume in 2017, however. The physical volume flowing through the GTS network via TTF, the net TTF volume, was 540 TWh in 2017, compared to 516 TWh in 2016. This means that, as in previous years, the physical TTF volume is greater than the domestic gas consumption in the Netherlands. Both national and foreign parties make use of TTF to fulfil their gas requirements. The highest number of active TTF traders on a single day further increased in 2017 to 151 (143 in 2016).

The bilateral Over-The-Counter (OTC) trade decreased from 16,607 TWh (in 2016) to 15,592 TWh. By contrast, the TTF segment traded via gas exchanges rose from 4,861 TWh to 5,370 TWh in 2017, an increase of 10% compared to 2016.

TTF expanded its lead as Europe’s largest gas trading platform over the past year. In 2017, 48% of European gas trading took place on TTF, compared with 47% in 2016. This confirms once again that the Dutch gas market is performing well.

GASPOOL (gas trading platform in Germany)
In 2017, the volume traded on the virtual gas trading platform GASPOOL increased slightly compared to the same period (January - December) in 2016, with a level of 1,565 TWh (2016: 1,505 TWh). The churn factor (the number of times that a quantity of gas is traded on average between its production and the consumption by the end user) for L-gas was 1.9, with a maximum value of 2.1 in October. The churn factor for H-gas decreased slightly to 3.9, with a maximum of 4.5 in September.

Regulatory developments


In the Netherlands, a system of revenue regulation applies: the rates are calculated by dividing the permitted revenues for the year in question by the estimated capacity bookings. If the actual number of bookings is different, and thus the revenues generated, the difference will be settled in later years.
The revenues permitted by the regulator consist of a capital cost allowance for the invested capital, a reimbursement for the annual depreciation costs (calculated on the basis of the depreciation periods determined by the regulator and the value of the assets) and a reimbursement for the operating costs.

Regulatory method
In its method decision for GTS, the Dutch regulatory authority, ACM, sets out the regulatory framework that determines the permitted revenues for GTS and the manner in which GTS is allowed to recoup its efficient costs during a certain regulatory period. These rules determine the level of our rates. On 24 February 2017, based on agreements it had reached with GTS and market parties, ACM determined the method by which GTS will be regulated for a period of five years (2017-2021). This method decision, in force retroactively from 1 January 2017, contains for the first time a cost efficiency comparison of GTS and other European gas transport companies (cost benchmark). ACM can be expected to use a similar cost benchmark in a subsequent method decision.

Besides the cost benchmark, the method decision contains other parameters and rules that determine the revenue level of GTS, such as the Weighted Average Cost of Capital (WACC), productivity improvement and rules for the manner in which GTS is allowed to recoup its efficient costs. GTS has filed an appeal with the Dutch Trade and Industry Appeals Tribunal (CBb) against the amount of the adopted productivity improvement and WACC.

Rate decision
The 2019 rate decision will be published in May 2018. Previous rate decisions were normally only published by the end of the year. However, the new European network code on harmonised transmission rate structures prescribes that publication must take place in the spring. This new network code will also lead to a renewed rate structure that is expected to take effect with the rates for 2020.


Revised entry rates for 2018
In June 2016, the German regulatory authority, BNetzA, published its decision on the cost allocation between network operators (Transmission System Operators or TSOs). This decision ensures that the entry rates of all TSOs operating within the same market area are the same, as a result of which bookings are expected to stabilise. The rate system was to become effective on 1 January 2018. However, three TSOs and one shipper have appealed against the decision at the Düsseldorf Higher Regional Court (OLG Düsseldorf). In November, the Higher Regional Court ruled that the BNetzA decision lacked a legal basis and the German regulator was therefore forced to revoke its decision. As a result, Gasunie Deutschland must calculate its own entry rates for 2018 without any cost allocation among the TSOs.

Result of the efficiency benchmark for the 2018-2022 regulatory period
At the end of the second quarter of 2016, Gasunie Deutschland submitted a cost estimate to BNetzA for its gas transport network for the new 2018-2022 regulatory period. BNetzA uses a benchmark to determine the individual efficiency of the network operators.

In individual letters to Gasunie Deutschland and the other TSOs, BNetzA announced the preliminary results of the efficiency benchmark: Gasunie Deutschland’s individual efficiency was 100% on the basis of the same parameters as previously plus compression capacity as one extra parameter. This announcement is regarded as preliminary, however, since the definitive hearing has not yet started and the final legal decision has not yet been given.

Developments in the EU

European collaborations
Energy users benefit from strong international gas connections and a liquid gas market. This has a positive effect on the availability and affordability of gas. In a world of energy that is becoming increasingly international, we want to ensure that our infrastructure is used as much as possible, and maintain or even increase its value.

With this in mind, we continue to seek opportunities for more intensive cooperation with other gas infrastructure companies. In this way, we encourage the development of a competitive, reliable and sustainable European gas market, and we promote market liquidity. This in turn leads to further expansion and reinforcement of our networks.

Market integration
As part of this collaboration, GTS and BBL Company prepared the integration of the BBL pipeline in the TTF market area in 2017. The elimination of the Julianadorp interconnection point yields the following benefits: a direct link between the two most liquid hubs of Europe, TTF and NBP; more attractive transport enabling shippers to respond more quickly to arbitrage opportunities; a significant increase in flexibility for the Dutch market; and a boost for liquidity on TTF. The BBL pipeline became part of the TTF market area on 1 January 2018.

One example of collaboration between TSOs is in ENTSOG (European Network of Transmission System Operators for Gas), and another is the PRISMA European capacity platform. Within ENTSOG, TSOs work on matters such as drawing up and implementing European network codes, the ten-year network development plan, and the promotion of transparency. In 2017, GTS continued to work on co-designing new European network codes, such as for rate structures, and to simplify the connection between market areas.

PRISMA is the main European booking platform for cross-border capacity, where a total of 37 TSOs from 16 different EU member states market their cross-border capacity. GTS and Gasunie Deutschland are two of the 24 shareholders of PRISMA.

Transparency platform
To facilitate optimum functioning of the European and national gas markets, European laws and regulations stipulate various requirements for the publication of data from transport contracts, and the use of that data. We facilitate these extensive publications through various channels that are based on European laws and regulations. Since it is of great importance for the market participants that the published information is consistent and comparable, we work continuously in a European context (ENTSOG) on the content of the publications and the development of the European transparency platform. In this way, we make a major contribution to the harmonisation of publications and transparent access to market information.

Collaboration among TSOs
Together with other network operators (TSOs), GTS and Gasunie Deutschland align the decline in capacity across the individual border points. TSOs are working together to encourage the development of a competitive, secure and - increasingly - sustainable European gas market and to enhance market liquidity. Examples of such collaborations are ENTSOG (European Network of Transmission System Operators for Gas) and the PRISMA European capacity platform. Within ENTSOG, TSOs work on matters such as drawing up and implementing European network codes, the ten-year network development plan, and the promotion of transparency.

By harmonising gas transport services, the thresholds for customers (particularly international customers) are kept as low as possible, enhancing cross-border gas trade. In 2017, GTS and Gasunie Deutschland continued their efforts to co-design new European network codes, in particular those for rate structures.

In 2017, together with GTS and the German TSOs, Gasunie Deutschland implemented the first phase of the Incremental Capacity Process in accordance with NC CAM. Based on non-committal shipper requests, extra entry capacity at the border between Russia and GASPOOL and extra capacity at the border between GASPOOL and GTS, towards the Netherlands, was identified. Initial technical studies were carried out and results were published in the context of the consultation process. The feedback from the shippers and other market participants will be analysed and the respective bid levels for extra incremental capacity will be offered in the upcoming auction for annual capacity.

Energy transition results [GTS]

A CO2-neutral energy supply calls for an innovative perspective on energy issues. GTS wishes to apply its knowledge and experience of energy infrastructures and markets to enable and accelerate the energy transition. We are working together with more and more parties to realise sustainable, affordable and reliable solutions. We do this by developing a long-term vision and by contributing to various initiatives.

From collective long-term visions to consequences for our network
GTS and TenneT have commissioned ECN to develop four energy scenarios, in each of which the combined market development of gas and electricity is described. Stakeholders have responded positively to this initiative and the result achieved so far. These scenarios are used for infrastructure and investment plans; they also served as the basis for the network development plan we published (2017 NOP).

The Dutch network operators, members of sector organisation Netbeheer Nederland, published a study entitled ‘Net voor de Toekomst’ (‘Network for the Future’). The scenarios in this study confirm the interdependence between renewable electricity and gas. The future energy supply will involve ever-increasing system integration between electricity, gas and heat, and between central and local. This important interplay between energy carriers in the future is both seen and shared by the collective network operators, underlining the continuing importance of gas networks for the energy transition.

Contribution to the heat transition for the built environment continues
We are involved in the heat transition of the built environment at both national and regional level.

At national level, we presented an additional package of measures to the Social Economic Council (SER) assurance committee for the energy agreement; we have signed the Green Deal on natural-gas-free neighbourhoods; we are involved in the detailed development of the high and low temperature transition paths by the Ministries of Economic Affairs and Climate and Foreign Affairs. In the national dialogue on heat (‘warmtetafel’), we are involved in the development of the assessment framework for the heat transition, and we have also prepared a position for the issue of cost allocation that is related to the heat transition. We provide housing associations with independent advice regarding sustainable heating technologies. And together with the installation sector organisation Uneto VNI, we have given a boost to the development of a national training programme for sustainable heat techniques for installation personnel.

At regional level, we encourage the roll-out of the hybrid heat pump through intensive cooperation with municipalities, regional network operators, housing corporations and installers. One example of this is ‘Groenversnelling’ (Green Acceleration), a project in which a hybrid heat pump is installed in 100 homes in Winsum (Groningen) in combination with the use of green gas. Another is our cooperation with the municipality of Groningen and regional network operator Enexis, to prepare detailed local energy/heat plans. We have also signed a cooperation agreement with the municipality of Groningen to establish an ‘energy desk’ to provide energy-saving measures to home owners. We have worked with the council to add heat pumps to the product range, and we also contribute to the promotion of the hybrid heat pump.

Hydrogen pipeline in Zeeland
Dow Benelux, Yara and ICL-IP, industrial companies in the Delta region in the province of Zeeland, are planning to exchange hydrogen for industrial application through our network. This intention was endorsed in 2016 through the Green Deal Hydrogen Symbiosis in the Delta Region. This Green Deal aims to enable the transport of hydrogen in this area within the legal framework of our role as gas network operator. During the implementation of the Green Deal, it was discovered that the legal and regulatory framework is inadequate for execution by GTS. In subsequent consultation with the project partners, including the Ministry of Economic Affairs and Climate and ACM, a solution was reached by transferring the project and pipeline to a new entity which was to be set up: Gasunie Waterstof Services B.V. (GWS). This takes the project outside the framework of GTS's statutory duty. GWS is expected to start transporting hydrogen from mid-2018.