Development of the European Gas Markets and Implications for Singapore. Drs. Martin J. van der Lugt

Transcription

1 Development of the European Gas Markets and Implications for Singapore Drs. Martin J. van der Lugt

2 TTF Development Price benchmark for Northwest Europe Pricing curve/products: Within-day, Day-ahead Balance of Week, Balance of Month Days, Weeks, Months, Quarters, Years Seasons Market-based TSO Balancing Operations Financial trading, indexation of LT supply contracts Churn 2014 > 30 More than 120 participants Traded OTC (LEBA) + Exchanges (TWh/month) TTF Net Volume (TWh/month)

3 Development of Regulatory Framework The creation of a single market for natural gas and electricity is embedded in the foundation of the European Union Treaty of Rome 1957 Single European Treaty 1985 Treaty of Maastricht 1992 Gas Directive (98/30/EC), common rules for EU member states energy market Regulated or negotiated third party access to pipeline distribution networks Unbundling of vertical integrated incumbent gas operators (no cross subsidies) Recommendation for independent regulatory regulators Member states were to implement Gas Directive in 2 years At least 20% of market free to choose supplier (28% after 5 years, 33% after 10 years) European Council, Lisbon March 2000 Undertake further steps for internal European energy market for natural gas and electricity Unequal market opening between member states Different forms of Third Party Access (regulated verses negotiated)

4 Development of Regulatory Framework European Council, Barcelona March 2002 Full market opening for industrial consumers in 2004, rest of market no later than 2007 Gas Directive (2003/55/EC) Mandated regulated Third Party Access for existing infrastructure Unbundling and legal separation of TSO Reinforcement of independent regulator mandates Third Party Access for Transit High Pressure pipelines Gas Directive (2009/73/EC), 3 rd Package Supplier switches to be implemented within 3 weeks Customers to receive relevant consumption data National regulators to cooperated in ACER (Agency for the Cooperation of Energy Regulators) Unbundling of TSO and operators of Storage and LNG Facilities Regulation Energy Market Integrity and Transparency (EU 1227/2011), REMIT Rules against market abuse, coordination in investigation into cross-border manipulation Transparency in traded markets

5 TTF Development Gas Directive (98/30/EC) Gas Directive (2003/55/EC) Gas Directive (2009/73/EC) REMIT Trading at Injection Point Trading at Virtual Point BTT TTF

6 2002 : Natural Gas Consumption 998 TWh 416 TWh 879 TWh 436 TWh Source: Eurostat

7 2002 : Germany vs. The Netherlands Germany Long term supplies on oil indexation Gas supplies with integrated balancing services Deregulated market all customers from 1998 onwards Netherlands Long term supplies on oil indexation Gas supplies with integrated balancing services Deregulated market for industrial customers in 1998 and all customers from July 2004 onwards Vertically integrated energy companies Market split in zones, each serviced by a different incumbent operator/supplier Vertically integrated energy company Early separation of transportation services from incumbent supply company

8 2002 : Germany vs. The Netherlands Germany Netherlands Cheaper supplies from UK Excess gas from ToP balances in LT contracts Independent new suppliers (Mobil/Duke Energy) trading at BTT Standardized contracts (EFET) Standardized contracts (EFET) Different TSO s for each market zone with different transport tariffs and balancing requirements No free storage capacity (all owned and operated by incumbents) Limited flexibility services for balancing Only one TSO for the whole network Early adopter of Entry/Exit methodology Independent non-incumbent suppliers (Mobil/Duke Energy) competitively offering storage and balancing resources and services

9 Main Difference Duke Energy provided independent production flexibility and was able to deliver a quantity of natural gas separately from the balancing services required by end-user customers Balancing Requirement Flat Quantity of Natural Gas Total Customer Off-take

10 Duke Energy Imports Norway Production BTT NBP Customers in The Netherlands

11 Border Title Transfer (BTT) BTT ALLOCATION AND MATCHING PROCEDURES The Quantity of Natural Gas can now be sold, purchased and traded on the same standardized terms (EFET) without affecting a customers balancing operating requirements at its off-take point.

12 TTF Balancing Development 2014 Adjusted Balancing Regime TSO Balancing Operations: Market Transactions New Balancing Regime TSO Balancing Operations: Bid Ladder 2003 TTF Set-Up Entry-Exit capacity Embedded Balancing Tolerance TSO Balancing Operations: Penalty Regime

13 LT supply agreement price indexation Oils - Gas 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Fuel Oil, Gasoil & Coal TTF, Zeebrugge, NBP

14 GasTerra s sales strategy 17-Oct Feb May Jun-08 8-Jul Jul Aug-08 9-Sep Sep Oct-08 3-Nov Nov-08 8-Dec Dec Jan-09 5-Feb Feb Mar-09 GasTerra gasoil 2010 forward price TTF hub 2010 forward price

15 Infrastructure Investments Industries have improved their operations to benefit from revenues from flexibility Rapid response salt cavern storage facilities 2005: RWE-Essent 2007: Vattenfall-Nuon 2011: Eneco 2011: Gasunie Seasonal storage 2015: TAQA Bergermeer storage New pipeline connection to UK 2006 Balgzand Bacton Line

16 2013 : Natural Gas Consumption 330 TWh 100 TWh 404 TWh Source: EIA

17 Singapore Today Centrally located in SE ASIA surrounded by production resources in Malaysia and Indonesia shipping routes LNG from Australia and Middle East Connected to neighboring markets directly through pipelines indirectly by sharing and competing for the same production resources LNG regasification Strong trading and financial infrastructure

18 Singapore Today Upstream pipeline natural gas is supplied in a bundle of commodity, flexibility and balancing services Upstream production and SLNG provide sufficient flexibility to manage end-user requirements and system necessities (pressure and quality management), but there is room for efficiency to be improved The Gas Network Code implements an allocation at injection points (excluding SLNG) in a manner that keeps commodity, flexibility and balancing services bundled (Shipper Attributed Quantities)

19 Minimal Next Steps The development of a market for natural gas requires: No restrictions on trading commodity Implementation of Allocation Agreements at Injection Points Shippers responsible to manage their own portfolio balance Natural Gas Code: Penalty regime for imbalances Availability of flexibility resources to be contracted by shippers for portfolio management Provided by operator (or its agent) Sourced from flexibility provided by upstream resources Producers/Importers SLNG

20 Results Competition between downstream customers and sectors Ability to optimize long term supply with traded commodity Development of a natural gas forward market Standardized trading in commodity Price point for Singapore natural gas Development of price point for LNG in SE Asia Attracts diversification of sources of natural gas Efficient use of flexibility and balancing resources Development of natural gas spot market as alternative balancing mechanism Infrastructure improvements as a result of price recognition of flexibility resources verses market requirements

21 End