Infrastructure and Trading in a Common European Gas Market The traders vision Copenhagen, 14th May...
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Transcript of Infrastructure and Trading in a Common European Gas Market The traders vision Copenhagen, 14th May...
Infrastructure and Trading in a Common European Gas Market
The trader’s vision
Copenhagen, 14th May 2004
Eric Bensaude
Member of the EFET Gas Committee
www.efet.org
Table of content
EFET vision and roles
Access to infrastructure
Regulation
Hubs
The EFET standard trading contracts
Conclusions
Members
APT - Atel - Avenis - Barclays - BG International – BHP Billiton - BKW FMB – BP – BNP Paribas - British Energy - Cargill - Centrica – C.N.R. - Dalkia - Delta – Deutsche Bank – EconGas - EdFT - Edison Spa – EDP Energia - E.F.T. - EGL - Electrabel- El Paso - Elsam - Elyo - EnBW- Endesa - Enel Trade - Eneco - Enipower - Entergy-Koch - E.ON – ESB - Essent - E&T- GS - Fortum - Gaselys – Gas Natural – Getec - GEW Rheinenergie - Glencore - Goldman Sachs - H.S.E. – Hydro - Hidroelectrica - Iberdrola - Innogy – Kelag - Kom-Strom - Morgan Stanley – Magnox – Mark-E - MVM Rt. - MVV Energie - Nuon - ONS Energy – OstElektra - PowerGen – PSE Electra - Inter RAO UES - RWE Trading - Sempra – Shell Energy - Stadtwerke Hannover - Stadtwerke Leipzig - Statkraft – Statoil - Sydkraft – Syneco - Tiwag - Total – Trafigura - Trianel - Union Fenosa - Vattenfall – Viesgo - West LB - Zarubeshgaz
represents more than 80 energy trading companies in 19 European Countries
Members
EFET - Roles
To promote energy trading in Europe
( to increase market efficiency)
Analyse barriers & obstacles for trade
Lobby for removal of obstacles & barriers
Promote standardisation
EFET – Vision
Promote the development of a transparent and liquid European market in energy commodities & related products, achieved through :
- Access to gas networks and storage infrastructures
- Confidence in regulatory decisions
- Confidence in the traded markets, not hindered by national borders or other barriers
Fair and non-discriminatory access to networks and storage is achieved through:
Non-discriminatory access to information Third party access rules (negotiated or regulated)
Promotion of secondary trading of capacity or a Use It Or Lose It (UIOLI) mechanism
Promotion of the resolution of cross-border, entry, exit congestion issues
Role of regulators – EFET’s position
Promote fair and non-discriminatory access to networks and gas storage
Regulators must
- ensure tariffs are based on efficient incurred costs
- oversee unbundling and development of competition
- manage transition to market-based mechanisms (eg. Balancing versus penalty regime) and full competition
For an efficient and liquid traded market there needs to be sufficient
harmonisation:
Transparent Information
Data exchange
Products and Procedures
Laws
Regulation
Tax
European Contracts
Organised Markets e.g. Exchanges or Hubs
What is a Gas Hub?
A contractual point where buyers and sellers execute transactions for gas
Hubs can be: Notional or physical Trans-regional (1 or more TSOs) or within-country (1 TSO)
Hubs generally, consist of: Hub Services Agreement - Hub Operator own/draft Standard Trading Contract - Traders own/draft
Interconnection of transmission systems
Multiple buyers and sellers
Deliverability/Back up & down (storage)
Standard trading contract
Title transfers & matching system
Price reporting
Forward trading
Infrastructure
Systems &Commercial
Arrangements
Liquidity
Low transaction cost
Hub services
Price transparency
Risk Management
Some basic requirements need to be in place for the existence of successful hubs
Key Requirements
Independent hub operator
ImpactImpact
Firmness
European Gas market( past )
Transmission
industry
Consumer
Distribution
www.efet.org
Supplier - marketer
Producers
LNG
Storage No Customer Choice
No Customer Choice
European Gas market(near future)
industry
Consumers
Distribution
Energy traders
www.efet.org
Energy traders
Suppliers -marketers
Producers
LNG
Storage
HUB
unbundled
Suppliers -marketers
Contractual flowsProducers
Physical flows
Customer Choice
Customer Choice
Independent
Network Operators
Transmission
The trading activity is supported by the existence of hubs and vice versa
Hubs promote :
A liquid source of supply, balancing, flexibility
The pricing of flexibility
Gas-to-gas competition
Arbitrage between regions
A forward trading market and the development of risk management tools
End-user choice of supply
Trading offers:
Sourcing
Liquidity
Flexibility supply and pricing
Price risk management
Geographic arbitrage
Time value arbitrage
Asset optimisation
Hubs enable a natural disconnection point between the upstream and the downstream, and allow the development of an efficient and competitive industry
Characteristics of notional hubs
Contained within an entry-exit tariff regime Directly related to transportation access terms, although
independent exchanges can still develop Can be influenced directly by a single regulatory authority Possible under a multi-node model (e.g. France) but with risks
of fragmented liquidity without the ability to net back imbalances to a single node
Provides natural location for a balancing market and market-based imbalance charge signals, and as location for cash-out and imbalance trading
Short term physical trading can lead to a reliable price index for longer term indexed deals and risk management products
Characteristics of trans-regional hubs
Pipeline interconnect and/or cross-border, preferably within reach of storage or other flexibility sources
Reflects longer term supply/demand fundamentals resulting in longer term transparency generating longer term investment signals
Provides flexibility for selling into adjacent local notional hubs Hub operator must want to develop services to attract
counter-parties / shippers and promote trading Have access to capacity to provide wheeling across pipeline
systems Provide platforms for secondary trading of services
Suited to longer term contracts as long as access regimes allow flexibility in onward transportation
The Traded Gas Market in Europe
Zeebrugge Hub 55 Counterparties
NBP 80 Counterparties
TTF 27 Counterparties
EynattenSmall number of traders with physical access
Zelzateapp. 7 counterparties
Baumgarten8 Counterparties?
Wallbach10 Counterparties
Emden/Oude Flange Trading > 12 Counterparties
PSV? Counterparties
Balancing Zones
GasPool? Counterparties
Eurohub Gmbh 15 Counterparties
Cross Border Hub
Confluence of pipelines
Multiple sources/outlets
Access to storage
Proximity of markets
Spot trade
Deliverability services
Title transfers
Notional or Trans-Regional Hub
Title tracking system
Standard trading contract
Financial trades
Firm deliveries
Price discovery
Screen-based trading
Forward trading
Initial phase Developing phase Matured phase
Bunde/Emden
PSV
NBP
Henry Hub
Baumgarten
PEG Nord
Zeebrugge
TTF
EXAMPLES
EXAMPLES
The European hubs have reached various degrees of maturity
Gas Hub Development Group & Standard contractual terms
EFET has established the Gas Hub Development Group (GHDG) to foster the development of successful Gas Trading Hubs
GHDG membership is from companies actively trading the existing Hubs and individuals who have been actively involved in their development
The GHDG is working on standard trading terms at the same Hub and where possible consistency across Hubs
In the longer term convergence of trading terms is both desirable and achievable.
EFET Standard Master Agreements
Designed for Physical Trading physical delivery as settlement
Download from internet@<www.efet.org> free of charge
Negotiation-Friendly Format Similar Structure to Principle Trading Agreements used in
other Markets and for Other Commodities and Commodity Derivatives
A truly “Pan-European” Contract, acceptable for common law and civil law
EFET Master Agreements
A beneficial framework
•neutral basis to start negotiations
•time saving on negotiations
•modular approach gives flexibility
•standardisation of procedures (less mistakes)
•Less credit necessary (netting)
•better risk control (close out netting)
•BIG savings on legal costs
Conclusions
EFET promotes the development of efficient markets throughout Europe
Access to infrastructure is key to market development
The development of hubs is also key to the evolution of markets
EFET would welcome a new Danish Gas Hub with effect of enhancing the customer choice
Thank you for your attention
www.efet.org :for position papers
- Key principles for the development of European gas market
- Creating successful transparent & liquid gas trading hubs
- Gas market information requirements