What are the key elements to create a successful gas hub in Europe?

Christos Papadopoulos's picture
Christos Papadopoulos, Regional Director Europe , Energy Exemplar
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Gastech News interviewed Christos Papadopoulos, Regional Director Europe at Energy Exemplar to discuss how the industry can optimise the operational and market risks of complex energy portfolios, how ETRM systems are evolving to reflect current market conditions and regulatory changes as well as what the key elements to create a successful gas hubs are. Read his views below:

Gastech News: What are the key issues of modelling modern energy prices formation and risk?

Christos Papadopoulos: It is a reality of today’s energy (gas in particular) markets that some less and others more, are neither (informational) Efficient nor fully transparent or Liquid, so inevitably not fully competitive. This practically means that they are also highly unpredictable (on the medium to long term, cause in the short term unpredictability is a positive indicator of market efficiency) with regards to future energy costs, respective market outcomes and associated prices for consumers.
Thus, a higher risk in total is involved which subsequently has a significant effect on the further development of these markets. In particular, any new Investment Planning process unavoidably falls under the full scope of Investment Planning and Decision Making Process under Uncertainty and Risk.
Under such circumstances, evaluating and optimising the operational and market risks of modern complex energy portfolios and of any new energy investments is a very difficult task that calls for enhanced sophistication in the modelling methods and tools needed. A combination of statistical/quantitative and fundamental methods along with a more integrated energy modelling approach can really offer such an enhanced sophistication in energy risk management.

Gastech News: Talking about advanced ETRM systems, how are they changing to reflect current market conditions and regulatory changes?

Christos Papadopoulos: One of the main challenges of ETRM systems providers is that definitions of what comprises an ETRM system and solution varies a lot among different type of users, making so quite hard even the “standardization” of the definition itself of what a modern ETRM system actually is or has to be... There are although some very basic and widely accepted needs that modern ETRM systems need to address and cover with the most important ones the simplicity on their implementation, future extension and ease of integration and use along with other Corporate Management Systems in order to get meaningful information out of it and of course all these to a Cost effective way.

Gastech News: Considering Europe’s major trading hubs, what are the key elements to create a successful gas hub?

Christos Papadopoulos: The primary element for a successful Gas Hub, which I would practically translated it to a Gas (Market) Hub or else Virtual trading Point (VTP) is nothing else other than a sufficient number of interested market participants from both the supply and the demand side and of course not just a single one or a limited number of them that will be able to impact price dynamics by possessing “Market Power”. Additionally and in effect, the next very basic recipes of a successful Gas (Market) Hub are not differing to those of a Free Competitive Market Hub and they can be summarised in:

  • Free Information Flow & Market Transparency in the hub
  • Sufficient Market Liquidity that is facilitated apart from the sufficient number of market participants by markets well-designed in both the market products available and the associated market timeframes.
  • Sufficient physical infrastructure and interconnectivity (e.g. gas pipelines with Bi-directional gas transit ability) that would allow free gas trading on all directions.

In the end, all these allow the establishment of a reference market price at the hub for any contract’s settlement.

Gastech News: From your point of view, will gas become a global market with a global price?

Christos Papadopoulos: The most recent developments, especially on the LNG markets and related supply chain (from Australia in the east to US in the west) along with the global investments on new infrastructure (liquefaction/gasification terminals as well as pipeline interconnectors and local flexible gas storages which will allow for the value maximization of diversification) are strong indications that this will basically be the case and that LNG will be the major facilitator towards such a Globalisation of the Gas markets.

Thursday, November 19th at 13:30 - Christos Papadopoulos, Regional Director Europe at Energy Exemplar will be speaking at the EAGC on security of supply and energy modelling. Follow the banner below to view the conference programme.

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