What do multiple gas supply streams mean for the CEE region? Interview with EBRD

Giuseppe Grimaldi's picture
Giuseppe Grimaldi, Energy Economist, European Bank for Reconstruction and Development
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When it comes to gas and LNG, Europe remains one of the largest consuming regions, and the demand outlook continues to be optimistic, especially when looking at Central and Eastern Europe. With the region continuously evolving, traders are looking at integrating gas hubs to further the development and liquidity.

Ahead of the upcoming CEE Gas Conference in March, Energy Economist from the European Bank for Reconstruction and Development (EBRD) and Executive Advisory Board Member, Giuseppe Grimaldi, spoke with Gastech Insights to share more about the progressing gas hubs and what they mean for the region.

Gastech Insights: The Central European Gas Hub (CEGH) is the leading gas hub for gas trading in the Central & Eastern European (CEE) region. What effect has this developing hub had on the gas market?

Giuseppe Grimaldi: The development of gas hubs in Europe, CEGH specifically, had a great impact on the wholesale gas markets allowing the gradual switch from oil indexation to hub indexation. This is very important for CEE because the region is heavily reliant on imports and needs the proper price signals and benchmarks to attract investments in the infrastructure. Looking ahead, CEGH regional importance should lead the way to increase market integration in the region and with other European regions to support the internal gas market goal.

Gastech Insights: What risk elements do financers need to consider when acquiring or developing energy and infrastructure assets?

Giuseppe Grimaldi: While the risk profile of various operations is different depending on the specific project characteristics, energy investors typically have to face a number of different delivery risks:

  • Operation risks, such as in any infrastructure investment linked to the construction phase and the operations, this includes also the environmental risks associated with new infrastructure development or in EBRD methodology also expected CO2 savings
  • Market risks, linked to price and supply/demand developments
  • Regulation risks, linked to change in policies and tariffs methodologies.

In the CEE gas sector, there is often the geopolitical risks which in countries such as Ukraine can have a disruptive effect on the market fundamentals. EBRD is an institution which by its own mandate is willing to take these risks for our goal of markets development in our countries of operations, and we also provide assistance to improve the governance and regulation in the sector so that best practices become common practices.

Gastech Insights: What do multiple gas supply streams mean for the CEE region, in terms of costs?

Giuseppe Grimaldi: Multiple gas supply sources, first of all, mean an increased diversification which is a mitigant factor for some of the risks component mentioned above. At the same time, additional infrastructure means additional costs for the end users. Successful western European examples, such as the UK, shows that an efficient regulation can be the key to minimize the costs and maximize the benefits. In the CEE region, a more resilient gas market is the starting point to develop more products and services that can make the whole economy in the region more competitive, even beyond the energy sector.

Gastech Insights: What can attendees of the CEE Gas Conference expect to take away in March 2018?

Giuseppe Grimaldi: Attendees of the event can expect to takeaway a very comprehensive view of the gas sector in the region. Having the main players in terms of industry, institution and investors provides a 360 degrees view of a market that is transitioning fast to meet the new goals of climate change and energy security. In such a fast pace developing environment it is extremely insightful to get a view on the progress, and the setbacks, of the changes in the market which include some major infrastructure projects expected to come online in the next couple of years.

Share your insights and join the conversation: How do you think the CEGH gas hub will develop the gas market in Europe? Leave your comment below.

If you would like to discover more about the regional gas hubs, attend the CEE Gas Conference on 7-8th March and hear industry experts discuss “The shift from oil-indexation to market pricing through regional gas trading hubs”. Register for your delegate pass today!