european gas price formation: realities and...
TRANSCRIPT
EUROPEAN GAS PRICE FORMATION:
REALITIES AND PERSPECTIVES
Ekaterina Orlova Institute for Energy and Finance
The X International Scientific Conference ENERGETIKA XXI: Economy, Policy, Ecology
“Challenges of De-carbonization and Recent Price Developments for Natural Gas in Eurasia” 9th -10th November 2017, St. Petersburg
European gas price formation development
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Source: according to International Gas Union Wholesale gas price formation
Gas-on-gas competition (GOG): LTCs with gas spot price-indexation; OTC and Exchange gas hub-based pricing Oil Price Escalation (OPE): LTCs with gas oil-indexed price
78%
15%
30%
66%
0%
15%
30%
45%
60%
75%
90%
Oil Price Escalation Gas-on-Gas Competition
2005 2007 2009 2010 2012 2013 2014 2015 2016
2016
Northwest Europe Central Europe
European gas price formation development
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Source: International Gas Union Wholesale gas price formation
Northwest and South Europe:
15 gas hubs – 2 are liquid (TTF in the Netherlands and NBP in the UK)
6 energy exchanges – 1 is regional
Central Europe:
4 gas hubs
3 energy exchanges
Gas hubs and energy exchanges development
Source: according to ICE, Powernext, EEX, CEGH, Gas Point Nordic, Polish Power Exchange
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Gas hubs and energy exchanges development
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Source: according to ICE, Powernext, EEX, CEGH, Gas Point Nordic, Polish Power Exchange
Country Energy Exchange Gas hubs
Northwest Europe
UK InterContinental Exchange (ICE) NBP, TTF
France Powernext PEG Nord, TTF
Germany European Energy Exchange (EEX) TTF, NCG, GPL
PEGAS – regional exchange
(Powernext and EEX Alliance)
Spot: CEGH VTP, ETF, GPL, NCG,
PEG Nord, TRS, TTF, ZTP
Futures: CEGH VTP, ETF, GPL,
NCG, PEG Nord, PSV, PSV Fin,
TRS, TTF, ZEE, ZTP
Denmark Gas Point Nordic (GPN, ранее – Nord
Pool Gas)
GTF, NPTF
Italy Gestore Mercati Energetici (GME) PSV / PSV fin
Central Europe
Austria Central European Gas Hub GAS
Exchange (CEGH GAS Exchange)
CEGH-VTP
Poland Polish Power Exchange (POLPX) VTP
Czech Central Czech Gas Exchange -
OTC and Exchange gas hubs trading: clearing houses guarantee reliability
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Exchanges OTC
Clearing houses: market risk
Spot and futures Pricing: standardized Quantity: standardized Maturity: standardized Quality: standardized Documentation: standardized
× NO Clearing houses: market risk & counterparty risk
Forward and options Pricing: customized Quantity: customized Maturity: customized Quality: customized Documentation: customized
Source: according to Outlook for a natural gas trading hub in SE Europe
A basic difference between OTC trading and exchange trading is that trading on the exchange takes place anonymously and the counterparty risk is managed by the exchange, i.e. the exchange – or its clearing house - guarantees that the other side of the transaction performs to its obligations.
OTC and Exchange gas hubs trading: OTC is the favored trading method
7 Source: ACER Market Monitoring Report
OTC and Exchange gas hub trading: only a tiny share of spot trading
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Source: ACER Market Monitoring Report
Spot products are mainly used for physical portfolio optimization close to delivery, short-term price
arbitrage and/or balancing purposes. Other products not only assist the supply portfolio and risk
hedging over the prompt horizon, but also tend to attract most of the speculative trading as these
products tend to be more price-volatile as well as offer a good number of counterparties.
spot
Crude oil prices and exchange spot hub-based pricing correlation
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Source: according to ICE, EEX, Powernext, CEGH
Crude oil Brent and WTI prices stood at $55/bbl and $50/bbl in September 2017
Oil prices fell by 50% from August 2014
0
30
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150
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50
01-2
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05-2
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09-2
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€/MWh
NCG TTF PEG Nord CEGH Brent (right) WTI (right)
$/bbl
LTC gas prices with oil-indexation and spot price-indexation
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Source: according to Heren
Contractual gas prices between EU consumers and Russian shipper stood at $5,7/MBTU, Norwegian shipper - $5,5/MBTU, Dutch shipper - $5,9/MBTU in September 2017
Prices fell by 45% from August 2014
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01-2
013
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$/MBTURussian-German border
Norwegian-German border
Dutch-German border
Exchange spot hub-based prices vs. Russian LTC gas price
11 Source: according to Powernext, EEX,
CEGH, Heren
Russian contractual gas price ($5,1/MBTU) was lower than Norwegian ($5,6/MBTU) and Dutch ($5,6/MBTU) by 9% in 2016
Russian gas deliveries amounted to 178 bcm in 2016 (+13% YoY)
0
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01-2
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€/MWh
NCG TTF PEG Nord CEGH Russian-German border (right)
$/MBTU
Exchange spot hub-based prices vs. Norwegian and Dutch LTC gas prices
12 Source: according to Powernext, EEX, CEGH,
Heren
Russian contractual gas price ($5,1/MBTU) was lower than Norwegian ($5,6/MBTU) and Dutch ($5,6/MBTU) by 9% in 2016
Norwegian gas deliveries amounted to 124 bcm in 2016 (+7,5% YoY), Dutch – 14,5 bcm (-70% YoY)
0
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01-2
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€/MWh
NCG TTFPEG Nord CEGHNorwegian-German border (right) Dutch-German border (right)
$/MBTU
Ekaterina Orlova
+7 968 048 1331
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