How to create the ideal gas trading scenario in Europe

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Doug Wood, Chairman of the Gas Committee, European Federation of Energy Traders
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There has been continued progress in the development of European gas hubs in the past few years, however there are still some very important hurdles to overcome before Europe can have highly efficient and mature gas markets.

As EFET is one of the association partners for the European Autumn Gas Conference (EAGC) this November in Milan, Gastech Insights spoke to the Chairman of the Gas Committee, Doug Wood, to discover more about European gas hubs and where the EFET see the market in the next five years.

Gastech Insights: What are the main gas trading opportunities in Europe?

Doug Wood: There are a number of opportunities opening up at the moment in different areas. We are seeing the return of potentially significant quantities of LNG available to Europe and there could be a different pricing basis which will open up trading opportunities. We are also seeing the development of new trading hubs in Central and Eastern Europe which will provide new geographic locations; each of these creating different opportunities for traders in the European gas market.

In Central and Eastern Europe, we are beginning to see some member states improving the design of their hubs, significantly in points further east. For example, in the Ukrainian gas market we have seen new legislation and increased opportunities for traders, with some trading companies even opening offices there. We have also seen a slowdown of improvements in the Turkish market, but we hope once the administration becomes more settled a resurgence of markets will open.  Each of these will have an impact on the member states between the more liquid hubs in North Western Europe and the larger markets surrounding Europe.

Gastech Insights: According to EFET, what should be done to create an ideal gas trading scenario in Europe?

Doug Wood: There are numerous things which we are pressing for and working with regulatory authorities to promote. Some of that is related to the design of gas hubs, so that particularly in the emerging markets, the hubs are well enough designed to be able to attract parties and to make it easier to trade at those hubs.

However, it still relies on a functioning gas market underlying this as well. This requires: a removal of regulated prices, easier access to move gas in and out of a hub, good pricing signals for transportation, simplified licencing conditions and a range of conditions which we have been promoting as a ‘How to’ guide based on best practice. We hope that member states and regulatory authorities in those developing markets will use this to help them to progress with liberalisation in their markets, with a view to establish more liquid gas hubs.

Gastech Insights: What are your predictions for Europe’s gas trading in the next 5 years?

Doug Wood: A lot will depend on where we see the European energy policy going. The arrival of potential new LNG cargos will have a significant impact on the market. In recent years, we have seen a growth in physical trading at a number of European hubs and we expect this to increase. Overall, we would expect to see more depth emerging at the key hubs in Europe which are becoming more liquid. TTF has become the most liquid hub but we also expect NBP to remain relevant for the foreseeable future.

Gastech Insights: What do you think are the main benefits of attending the EAGC?

Doug Wood: The EAGC provides a great opportunity to discuss new ideas within the industry with a large network of colleagues. It also gives you the chance to hear some of the wider challenges within the global gas market.

Share your insights and join the conversation: Where do you see the European gas hubs in the next 5 years? Will TTF continue to be the most liquid? Leave your comment below. 

The EAGC is Europe's longest running commercial gas conference, beginning with a specialist Traders' Day, focusing on the latest developments in trading. View the full conference programme and register now

Image courtesy of EFET