Transcript Price Structure - ICIS Heren
ICIS gas market pricing
Bursa, 26 April 2013
Louise Boddy – Director, Global Energy Markets Aura Sabadus – Senior Reporter, Turkish Markets
Contents
1. Introduction to ICIS 2. Evolution of European gas markets and pricing 3. ICIS Turkish market coverage 4. ICIS Turkish gas pricing trials and methodology
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1. Introduction to ICIS
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Corporate structure
• ICIS is the energy and chemicals information division and the fastest growing business within Reed Business Information (RBI).
• RBI is a powerful business-to-business publisher. It is part of parent company Reed Elsevier.
• World ’s third largest professional information company (after Google and Thomson Reuters). Global leader in Science, Medical, Legal, Risk and Business data services, and Exhibitions. Employs over 35,000 people worldwide. Annual revenues of over £6bn in 2011.
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ICIS – reporting on and analysing energy, chemical and fertiliser markets.
Over 600 staff globally.
New York Washington Houston London Germany Moscow Mumbai Yantai Shanghai Guangzhou Singapore
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2. Evolution of European gas markets and pricing
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History of gas price reporting
19 years of ICIS gas prices – first to bring price transparency into every new market 1994 – Heren Energy (now ICIS) started pricing UK gas trade, assessing Bacton and St. Fergus beach trade before the virtual hub was created. 1996 – Network Code launched, creating the NBP traded market.
1998 – First pipeline to continental Europe. ICIS starts first price assessments outside UK at Zeebrugge.
2005 – First LNG cargoes arrive in the UK at Isle of Grain.
2006 – ICIS launches global LNG reporting and the first Asian LNG spot price assessment in 2007.
2005-2008 - new European assessments started every year as trading spreads.
NOW - 700-1000 primary prices published every day. 193 for European gas.
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Market evolution phase
FORMATIVE
Characteristics
Low liquidity, low numbers of counterparties, little standardisation, no brokers, wide bid/offer spreads, contradictory price signals.
Suitable pricing methodologies
• Assessment.
IMMATURE LIQUID MATURE Medium liquidity, growing number of regular counterparties (>20), narrowing bid/offer spreads High liquidity , steady number of regular counterparties (<20), narrow bid/offer spreads every day on a range of contracts.
High liquidity on spot and curve contracts, steady number of regular counterparties (<30), narrow bid/offer spreads every day on a range of contracts, derivative trade developed.
• • • • • • Assessment.
Assessment.
Trades-based index over long periods (all day/all month).
Assessment.
Trades-based index over long periods (all day/all month).
Trades-based index over short periods (5-30 minutes).
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European gas hubs by development phase
FORMATIVE Turkey Spain (AOC) Poland IMMATURE Czech Republic Austria (CEGH) Italy (PSV) LIQUID Germany (NCG) Germany (GASPOOL) France (PEGS) Belgium (Zeebrugge) MATURE Britain (NBP) Netherlands (TTF)
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Pan-European hub trade volume 2003-2012
Source: Transmission System Operators
GWh/month 80000 70000 60000 50000 40000 30000 20000 10000 0 www.icis.com
Tradability index by hub 2007-2013 This measures bid/offer spread availability, not volume
Source: ICIS European Gas Hub Report
20 18 16 14 12 10 4 2 8 6 0 Q3 '07 Q1 '08 Q3 '08 Q4 '08 Q3 '09* Q4 '09 Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4'11 Q1'12 Q2'12 Q3 '12 Q4 '12 Q1 '13 www.icis.com
TTF Zeebrugge NBP GASPOOL PEG Nord NCG PSV CEGH Czech
Many hub contracts have consistent high liquidity Number of trades going into the ICIS front-month indices
12000 10000 8000 6000 4000 2000 0 TTF NBP NCG Zee www.icis.com
ICIS prices are the most widely used benchmarks in Europe
Built into many contracts. The most reliable measure of physical traded value: 1. In high volume, long-term, pipeline and LNG supply contracts.
2. In short and medium term supply contracts.
3. In floating-price end-user contracts.
4. Infrastructure operators ’ capacity sale and auction contracts.
5. In Energy Trading and Risk Management Systems.
6. In physically settled derivative contracts.
Used as a reference price by many different business functions: 7. As a starting point for negotiations.
8. In valuation of assets.
9. In strategic planning.
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3. ICIS Turkish market coverage
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Price reporting What is price discovery?
Just that. It seeks to determine a reliable price for a specific contract at a specific moment in time by talking directly to a wide section of the market.
Why is it useful?
It brings transparency It gives coherence to the market It helps to minimise risk www.icis.com
Developing spot and balancing gas prices for Turkey
• Tests carried out weekly for
day 7 ex-post
( “day after”) prices from 30 November (start day of test 6 December) • Tests carried out daily for
day 7 ex-post
prices from 31 December (start day of test 7 January) • Tests carried out daily for
day-ahead
prices from 12 March (start date of test 11 March) www.icis.com
Test details – who was approached?
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How is the test conducted?
• An average of five different companies submit prices to ICIS on a daily basis • Around one third of our communication is done via e-mail • Two thirds by phone • Companies are contacted between 11:00-14:00 for Day-ahead and throughout the day for ex-post deals • Average call duration 5 minutes www.icis.com
Test findings
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Reporting trades and swaps…
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Challenges – Collecting data
• • • • • AT THE BEGINNING Confusion over day-ahead, day-after prices and trades Reluctance to report higher volumes Reluctance to confirm the counterparty NOW Reluctance to confirm counterparty Ensuring that companies submit trade prices or bid-offer spreads www.icis.com
Intrinsic market challenges
• Natural gas volumes tied up in TOP contracts – hence little liquidity on the market, particularly for day-ahead trading • BOTAS book closure – what happens afterwards?
• Stamp tax – a market killer www.icis.com
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Stamp tax – kills the market
• Jeopardises security of supply • Deters investors • Fractures the market • Drives financial trading to other jurisdictions that are not covered by the tax. Turkish companies interested in speculation could, in theory, trade in the UK • Seriously affects Turkey’s ambition of becoming an energy and financial hub www.icis.com
Reliability of day-after and day-ahead Turkish gas prices
• Good reflection of market views (importers and wholesalers). Comparison between Turkish and Czech gas markets.
• Avoiding manipulation through cross-checking trades, bid offer spreads, mid points with other companies.
• Assessments done in a transparent manner • Bring consistency to the market and visibility to traders www.icis.com
Sooner or later? Developing Turkish gas prices
• Bringing liquidity to the market: the “Turkish Airlines” effect. Where Turkish Airlines fly, business follows • Crucial to investors • Need to offer a south-eastern counterbalance to the north west European hubs and reach out to the Middle East and the Caspian region www.icis.com
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Price visibility is crucial to investors
Spot prices bring: • Transparency • Flexibility www.icis.com
T-Hub is vital for southeast Europe, Middle East & Caspian region AOC NBP GTF TTF GASPOOL ZEE NCG Czech PEGs VTP PSV T-HUB
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Thank you!
Aura Sabadus + 44 (0) 207 911 1853 [email protected]
Louise Boddy +44 (0) 207 911 1928 [email protected]
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