Gasunie CEO: A Firm Belief in Gas
A nominee for "Executive of the Year" at the forthcoming European Gas Conference, Paul Van Gelder, CEO of Gasunie, says 2012 was a good year for the Dutch TSO. There were some difficulties but above all a lot of successes. Some of the difficulty surrounded criticism over Gasunie's acquisition in 2007 of the gas transport division of the north-German company BEB Erdgas und Erdöl GmbH.
He explains: "Since the government is the only shareholder of Gasunie, we are under a lot of scrutiny from our stakeholders: the government and our regulator, who are very carefully watching the steps that we're taking. So in this situation, where we were under lots of pressure with regards to the regulation, but we still made some good steps.
"Pressure was also on us because there was a report published by the Court of Audit that checks all of the state-owned companies and they were quite critical of that acquisition in 2007, so we had to fight public opinion and some negative press attention. We had to explain the strategic value of this acquisition for Gasunie and for the Netherlands, but were able to do that and concentrate on our successes."
One of those successes, he says, was the completion of the second line of Nord Stream in October 2012. Gasunie is a share in Nord Stream. “This is an important step for Europe’s long-term energy security. The fact that Nord Stream has realised this project within time and budget is a huge achievement. We are proud to have contributed to this in excellent cross-border cooperation with the other shareholders.”
Mr. Van Gelder also told us Gasunie is one of the main players in the development of PRISMA project, "a European booking platform for cross border capacity that is a very important and underlines our very important contribution to the European Network of Transmission System Operators for Gas ("ENTSOG")."
Another success was the opening of a nitrogen buffer by Gasunie. "With this buffer we are able to continue the delivery of “L-gas”, "L gas" which is the typical low calorific gas that comes from the Netherlands and flows into northern Germany, France and Belgium, as well as some to the southern part of Germany as well," explains Mr. Van Gelder.
“As Dutch gas supplies are gradually declining, gas from other countries will start to occupy an increasingly prominent role in the energy mix. By mixing the foreign gas with nitrogen, Gasunie can make it suitable for use as L-gas.
"In Germany, we kicked off the Exel Project (which stands for "Exit Ellund) in developing through autonomous growth new assets that will provide long term gas flows into Denmark and Sweden. We continue to develop our strategic position, supplying gas to a number of countries: Belgium, Germany, England (through the BBL), Denmark and, indirectly, to Sweden. This gives us a unique position in Europe," he says.
He adds that in 2012 the Court of Appeal for Trade and Industry has declared that the objections to the NMa’s (Dutch Competition Authority) Method Decisions were unfounded.
Mr. Van Gelder explains, "These Method Decisions are a determining factor for the tariffs that Gasunie is permitted to calculate for gas transport. The court’s judgement confirmed that the NMa had set up a stable and well-founded calculation method for gas transport tariffs. This meant that Gasunie could continue to apply the current tariffs laid down by the NMa, which was a positive outcome for us since it was also a precedent for future regulation in the Netherlands, so we were pleased to receive this ruling.”
He says that all of this has been accomplished in the context of the nearly three years since he's been at Gasunie. "It's been quite a challenge, but we were able to go through it quite successfully and we're now looking at a company that is changing, and change is needed as the TSO landscape is changing."
In connection with your nomination for "Executive of the Year" how would you describe your management style, given that Gasunie is involved in so many different kinds of activities and initiatives?
First of all, I think I've got a great team. I joined the company in 2010 and the team changed the next year. In 2012 we made the latest changes in the organization, so now we have a completely new executive board, but also the management board, which is one layer below the executive board, they are seasoned professionals and have accompanied me on this route toward a new long-term future for Gasunie.
It's all about getting all the right people in the right place and making sure that they have the right mentality - a winning mentality is very important.
What would you say are the "burning issues" for TSOs today in Europe?
At this time we're seeing the growth of the use of coal in the energy sector, which is replacing the use of natural gas in power production - that's one of our main concerns and not everyone seems to understand what the future energy mix requires. It requires renewable energy sources like wind or solar in combination with a backup. If you look at all the credentials for gas, for us the choice has always been clear - it's by far the best fossil fuel to backup intermittent renewable energy sources, but somehow we're not getting that across and end up with an energy mix, especially here in the Netherlands, consisting of renewables and coal, which is awkward, especially for a gas country like the Netherlands.
Ultimately, I'm optimistic that this combination of coal and renewables is not sustainable.
What are your overall thoughts on reducing CO2 emissions in Europe and the future for natural gas?
As I said, I'm optimistic. Coal and renewable energy resources will not be a sustainable solution simply for the fact that carbon capture storage (CCS) is underdeveloped in Europe and in a lot of countries It lacks of public acceptance for CCS. In the meantime, you have to look for that fossil fuel that emits the lowest level of CO2, provides the maximum flexibility and has the right price.
The price is an issue right now and that has to do with the malfunctioning of the emissions trading system (ETS). Once we get the ETS working again, get a lot of gas trading on the spot markets, and get the public informed on the bad sides to the use of coal then gas is there to stay and fill in for coal. We will end up with the right combination: renewable energy sources and natural gas.
How do you see the landscape for natural gas infrastructure investments given the current low demand?
As a company like Gasunie we have a very good picture of what's needed on the gas infrastructure side and feel that we should develop a new model for TSOs, really talk to the customers but also to the authorities and have a very good understanding of the future developments before starting investing in new pipeline infrastructure. At Gasunie we call this thinking "capacity at risk modeling." We model where we think the capacities are needed and we do a stress test before we take the final decision to invest in new pipelines.
That's needed, not only between TSOs and other stakeholders, but also between TSOs under a European umbrella, because otherwise we'll end up with European pipelines that could be underutilized.
What else should we know about your leadership in the last year at Gasunie?
The reality nowadays for a chief executive of a company with two TSOs at two sides of a border is not easy. We're in an uncertain period of time where, under the influence of the crisis, there's a lack of political leadership in making the right choices for the energy mix of the future.
As a chief executive you have to be able to predict the future, live with the effects of the crisis and you have to work under tight regulation. So it's not easy, but the positive thing is, you have to believe in the commodity, which is natural gas, a very flexible commodity and the cleanest fossil fuel. You have to believe in the fact that natural gas will play an important role in the future energy mix long term, and that the results of the oil and gas business are still very promising, even in the short and mid term. With the wide-ranging opportunities of our infrastructure Gasunie has a good, strategic position to allow Europe to benefit from all advantages of natural gas.