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Best practice for natural gas hub planning, development and operation

Best practice for natural gas hub planning, development and operation. Ben Samuel Deputy Editor ESGM ben.samuel@icis.com Tel: 0044 207 911 1726 Eikon: ben.Samuel@icis.com http://www.icis.com/. Scope of presentation. Requirements for the development of a natural gas hub

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Best practice for natural gas hub planning, development and operation

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  1. Best practice for natural gas hub planning, development and operation Ben Samuel Deputy Editor ESGM ben.samuel@icis.com Tel: 0044 207 911 1726 Eikon: ben.Samuel@icis.com http://www.icis.com/

  2. Scope of presentation • Requirements for the development of a natural gas hub • Opportunities for Bulgaria and South East Europe • Examples from the British market (NBP)

  3. Prerequisites for a natural gas hub • Political commitment • Liberalisation of end user market; industrial, commercial, residential • Standardisation of contracts • Defined geographical reference point, on a country or regional basis • Supply diversification

  4. Opportunities for Bulgaria and the South East • Opening up of the Western Line • Black Sea volumes from Romania • Caspian volumes via Shah Deniz II (TAP) • LNG from Greece via the ICGB – Turkey/Croatia?

  5. The opening of the Western Line • Two Russian contracts expiring • Unused capacity to be sold through the regional booking platform (RPB) • Flows can physically move south and virtually move north • Facilitating exports from Romania and diversifying away from Russia

  6. Trans Adriatic Pipeline (TAP) New source of supply via ICGB Volumes small initially, but diversification creates competition

  7. Access to LNG Facilitated by the ICGB Access to the global market, including US/Africa Increasing capacity coming online in the coming years

  8. Example from US LNG Export capacity could increase 1,300% in three years

  9. Developing a gas hub: The British example • Market liberalisation starts around 30 years ago • Driven by desire to balance government spending in the 1980s • British Gas was the second major state-owned company to be privatised (1986) • 15 years before the transition to competitive market was complete • Now gas entirely linked to market fundamentals, no oil-indexation

  10. What is the NBP gas hub? • NBP = National balancing point • Covers the whole transmission network • Permits the balancing mechanism of the network code – daily balancing • Allows shippers to nominate buy/sell trades to any network point • Managed by an independent system operator – National Grid • Introduced in 1996

  11. First stages • Third party access • Bilateral trading, often with help of first brokers • Trade reporting • Price assessments/indices • Development of a forward curve

  12. Development of a forward curve/price reporting Prompt Curve Near curve Far curve

  13. A trading screen

  14. Moving away from oil-indexation • Traditionally gas prices were linked to oil • Still the case with many Gazprom contracts • For a hub to develop prices must be linked to supply/demand fundamentals • This information must be comprehensive for the market to have confidence • Examples from Britain

  15. National Grid demand information

  16. Supply data

  17. Reports of outages

  18. In summary • Bulgaria/South East Europe are in an exciting position • Diversification of supply in the coming years will create opportunities for the wholesale market • Regional cooperation will be important • Third party access, liberalisation of end user market are key first steps • Development of a liquid gas hub can take 10-15 years

  19. Thank you Ben Samuel Deputy Editor ESGM ben.samuel@icis.com Tel: 0044 207 911 1726 Eikon: ben.Samuel@icis.com http://www.icis.com/

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