With professionals at Stratega East having operated large portfolios for some of Europe's largest energy utilities, their understanding of the energy community, market integration processes and business relations provides us with vast insights into how the CEE region works and how it could grow.
Ahead of the CEE Gas Conference taking place next week, 7-8 March, Gastech Insights spoke with Executive Advisory Board Member for the 2018 CEE Gas Conference and Director at Stratega East, Aleksandar Karancevic, to hear more about the trading dynamics in the region and what he is most looking forward to at the upcoming event.
This is the second part of a two-part interview with Mr Katancevic on the Central and Southeastern European gas market. Click here to read his great insights on how the gas market can successfully grow within the region.
Gastech Insights: How do the trading dynamics in the C&SEE region differ to Western Europe?
Aleksandar Katancevic: In the C&SEE I would separate the dynamics into two:
Long-term market: The region is likely to have different pricing dynamics to Western Europe depending on the gas-contract price formulas. In the C&SEE, lagging oil price is the key component of the forward price. At the same time, the Western hubs that publicly listed future contracts are indexed by supply and demand factors with a global influence. In order to achieve some correlation between Western Europe and the gas hubs in C&SEE, the C&SEE gas hubs must develop liquid future markets and diversify the supply of natural gas.
Short-term market: Due to the optimization needs, there is a greater chance to have a correlation based on actual demand and available supply, as well as a correlated spot price calculation between Western Europe and the C&SEE. This is because of the real daily trades and physical flows of natural gas.
Gastech Insights: When do you expect these markets to become fully integrated?
Aleksandar Katancevic: Full integration will happen with enough diversity of supply and enough demand to take on new supply. More integration of Western markets with C&SEE will happen after the improvement of supply the South Europe and achieving a market situation where gas may flow both directions (not just North to South, but also having reverse flow from the South to the North). The SEE area is looking after the Southern Gas Corridor and the LNG re-gas facilities in Croatia, Greece and Turkey, which together represent the evolving integration factor of the C&SEE into a single gas market in the EU.
Gastech Insights: What are you most looking forward to at CEE Gas Conference next week (7-8 March)?
Aleksandar Katancevic: As it was the case in 2017, it will be nice to see and meet all the domestic market players of Croatia and the C&SEE region, followed by international energy trading parties and the LNG marketers. Also, I believe it would be necessary to see again the high-level political representatives continuing to support the new infrastructure initiatives and the domestic and international investors - financial sector representatives interested to finance projects. I am always glad to hear expert’s opinions from the think-tanks organizations and I am looking forward to the provocative panel discussions. I will see you in Zagreb next week!
In part one of this two-part interview, we discovered key insights into the Central & Southeastern European gas industry and what is required for the development of flexible short-term markets. Read part one today to explore the exclusive views.
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