Trading in the SEE Gas Market

A trader’s vision

Zagreb, 28 September 2004

Doug Wood

Chair, EFET Gas Hub Development Group

Member, EFET Gas Committee

www.efet.org

EFET represents

75 members in

16 European countries

and is still growing

What does a market deliver?

Consumer choice, product innovation, improved efficiency from…

Price Transparency Signals to producers, Signals to consumers Signals to infrastructure providers

Short term optimisation

Congestion management

What does a market do ?

What can a market deliver ?

Consumer choice

Sends price signals for production & consumption

Rewards lower cost / higher value operators

Prices are market based not cost based

Congestion management

Contract optimisation

Improved efficiency

What characterises a competitive market?

Willing buyers and sellers

Low barriers to entry/exit

Product innovation and variety

Liquidity, depth, transparency

Volatile prices

$

X

s

d

What is necessary for a competitive market?

Access to customers Access to transportation Access to gas Access to storage / flexibility

Organised markets: exchanges and hubs Information transparency Data exchange Products and procedures Laws and regulations Standardised contracts

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

PSV22 Counterparties

PEG Balancing Zones

GasPool? Counterparties

Eurohub Gmbh 15 Counterparties

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

The SEE Gas Market – shopping list for a liberalised gas

market

Encourage multiple buyers and sellers Provide non-discriminatory access to

transportation & storage Promote price transparency Avoid subsidised prices and protected markets Liberalise power markets Promote gas availability – release schemes? Ensure rules are transparent Empower strong and effective regulators and

competition authorities Deal with credit

Conclusions

SEE is an important market in its own right SEE has an opportunity to become an

important transit region New areas of potential from

environmental improvement

But… Political will is paramount Transit faces competition from NE Europe,

Baltic, LNG, N Africa, Mediterranean

Set a realistic achievable timetable and stick to it!