EUROPEAN GAS
transmission system operators more buyers and sellers. The paper set out a number of recommendations
power to choose where the gas goes, on how to promote greater secondary market activity, including
and the need to strengthen gas infra- “harmonised and timely platforms, coordination processes and infor-
structure, to diversify gas supplies and mation rights.”
thereby provide more competition in On the whole, our Expert Panel thought that there would be an
the market. increase in the trading of secondary capacity rights, largely because
a general increase in trading will result in an increase in all products,
RSO May be an Alternative including secondary capacity rights, and that this should produce
The European Federation of Energy more liquidity in the market.
Traders (EFET), while believing that There was less of a consensus on whether, gas release programmes
ownership unbundling would be desir- are the best way of facilitating wholesale gas trading.
able, takes a fairly pragmatic Although many of our panel believed that it was an effective mech-
approach. It believes that an alterna- anism, there was less agreement about whether this was the best
tive to ownership unbundling should way. In the same way, opinions were divided on whether long-term
be put forward to improve the current contracts made it impossible for third parties to access gas in
system for cross-border trade. This upstream markets, although there was some agreement that these
could be in the form of “regional sys- do indeed make it more difficult.
tem operators” or a system in which Cross-border trade in gas is a good way of improving liquidity in
national TSOs could “transcend” the market, but non-discriminatory access to cross-border capacity
boundaries to be involved in decisions is an issue which still has to be resolved. New entrants are not able
concerning investment in cross-border to compete on an equal footing with incumbents for access to
transmission capacity. This could mean cross-border transit capacity, and this acts as a barrier to competi-
merging TSOs in many cases. tion. Coordination between national energy networks, in terms of
technical standards, gas quality and congestion management
Spot, Capacity & mechanisms, is relatively low and needs to be improved if there is
Cross-Border Trading to be an integrated pan-European gas network. Such a network
There was less agreement amongst would facilitate investment in cross-border capacity, not only by
our Expert Panel on the question of the incumbents but also by new entrants. More investment in facil-
whether we would ever see a situation ities and infrastructure would itself have the effect of improving
in the EU like in North America, where liquidity in the market.
about 60% of contracts are for less
than12 months. Some panel members Some Signs of Progress
believed that political concerns over In the meantime, liquidity on the European wholesale gas markets
security of supply in Europe will make it is likely to remain low, although there are some positive signs which
difficult for short-term contracts to could have an impact in the short-term.
develop in the same way as in the US, Wingas’s decision earlier this year to merge its three gas trading
while there was some doubt about zones in Germany into one from 1
st
October 2007, following similar
whether a spot market could develop in moves by RWE and E.ON, should help to strengthen liquidity. Plans
Europe in the same way as in the USA, for Wingas to merge their trading zones with other gas companies
because of the small number of domi- later this year should also help to make trading more liquid. The
nant incumbents in the EU. Conversely,
others thought that with more flexibili-
The Commission is expected to produce a third draft
ty in the market, there would no longer directive on energy liberalisation before the
be the need for long-term contracts.
end of September 2007
The issue of secondary gas capacity
rights in the EU is also a key concern for increasing availability of LNG in the European market should also
the gas industry. The EU energy regula- help to drive growth in wholesale gas liquidity in southern Europe,
tors group (ERGEG) believes that these particularly as France develops more LNG terminals, and gas
markets are an important vehicle for demand continues to grow in Spain and Portugal.
capacity re-trading and therefore for However, much will depend on the development of further EU leg-
providing access to gas markets within islation on the EU electricity and gas markets. The European
the EU. EFET produced a position paper Commission is expected to produce a third draft directive on energy
on this subject on 29
th
March 2007 liberalisation before the end of September 2007, and all market par-
which states that the secondary market ticipants will await this document with interest •
plays a vital role in helping market par-
* The survey is run in association with EFET and is conducted by
ticipants manage and shape capacity
Moffatt Associates: an independent market research and business
needs to meet business requirements,
strategy consultancy based in London.
where the price of traded capacity is
This article first appeared in APX’s quarterly Energy Viewpoints bulletin August 2007.
determined by agreement between
www.moffatt-associates.com
72 SEPTEMBER 2007 COMMODITIES NOW
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