1. Best practice for natural gas hub planning, development and operation
Ben Samuel
Deputy Editor ESGM
Tel:
Eikon:

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

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

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

14. A trading screen

15. 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

16. National Grid demand information

17. Supply data

18. Reports of outages

19. 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 years

20. Thank you Ben Samuel Deputy Editor ESGM ben.samuel@icis.com
Tel:
Eikon: