Patrick Heather

Senior Research Fellow

Patrick Heather joined the institute in June 2006. His works include: ‘The Evolution and Functioning of the Traded Gas Market in Britain’ (August 2010); a co-authored comment with Jim Henderson, ‘Lessons from the February 2012 European gas crisis’ (April 2012); and the paper ‘Continental European Gas Hubs: are they fit for purpose?’ (June 2012). His paper, ‘The evolution of European traded gas hubs’ (December 2015) focused on the evolution of the gas markets across the continent in the context of the European Commission’s vision of a Single Energy Market (in gas); the paper described the ‘path to maturity’ of traded gas hubs and analysed their stages of development using both objective and subjective measures; he has since brought the results of that research up to date in a co-authored Insight with Beatrice Petrovitch, ‘European traded gas hubs: an updated analysis on liquidity, maturity and barriers to market integration’ (May 2017). Since 2004, Patrick has been an independent consultant focusing on the gas market evolution in Europe, supply and demand dynamics, the impact of regulation on market outcomes, contracting strategy, and marketing strategies to take advantage of new market opportunities. Patrick has advised and given presentations to many different organizations, including the European Commission, the APX and ICE futures exchanges and various producer and end user companies, financial institutions, regulators, and governments in Australia, Austria, Brazil, Britain, China, Estonia, France, Greece, Holland, India, Italy, Japan, Norway, the Philippines, Poland, Russia, Sweden and Turkey. In 2006, he was appointed commercial adviser to South Hook Gas to assist them through the long commissioning phase of their world-leading LNG import facility in South Wales, which was successfully achieved in 2009. Patrick has over 35 years’ experience of broking, trading, and risk management in the natural gas, power, oil, and oil products markets, and working as a gas market expert for European utilities and gas suppliers, British investment banks, and international oil majors.

Areas of Expertise
UK and North West European LNG and natural gas markets; power and carbon markets; physical and financial trading and risk management.

Contact

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                    [post_content] => This Energy Insight provides an analysis on the maturity and development of European traded gas hubs, including both longer-term established hubs and recently emerging ones, both from a liquidity and price perspective, in order to come to an overall assessment of the policy goal of achieving a Single Energy Market for natural gas in Europe. This Insight complements substantial research work undertaken in the last few years by the OIES, and offers an update on both hub liquidity development and hub price metrics to the end of 2016.
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                    [post_content] => This paper by Patrick Heather is the third he has written on the development of European traded gas hubs. It is the culmination of extensive field research interviewing a range of market participants from regulators, TSOs, traders and government officials – from Spain to the Baltics, from Britain to the Balkans and many points in between. In addition to comparing national aspirations with EC goals and deadlines he has noted not just the infrastructure projects required to create the connectivity for traded market development, but equally importantly the political will, cultural acceptance of traded markets and the commercial appetite. Clearly to achieve the vision of the Gas Target Model there is certainly ‘much left to do’.

In terms of assessing the stage of development of the various hubs, Patrick presents not only an update of his own quantitative and subjective measures but also incorporates the work of other relevant surveys and academic analyses. Based on this substantial synthesis, the results, both intuitively and analytically compelling, highlight the limited progress made by other hubs in ‘catching up with’ the Dutch and British hubs.

Executive Summary
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                    [post_content] => This paper by Patrick Heather assesses the development of the European Continental Gas Trading Hubs. It is a natural successor to his 2010 paper ‘The Evolution and Functioning of the Traded Gas Market in Britain’.  Although the drivers and challenges for gas trading on the European Continent have been different from those of Britain, the desire for change at an EU policy level, the catalyst of the economic recession and the sea-change in the acceptance of trading have all contributed to an astonishing development in European gas hubs over the past few years.

Based on extensive research and discussion with the key actors intimately involved, the paper provides deep insights into the characteristics of the individual hubs, the reasons behind their particular evolutionary path and their characterisation as ‘Trading Hubs’ (NBP and TTF), ‘Transit Hubs (ZEE and CEGH) and ‘Transition Hubs’ (GPL, NCG, PEGs and PSV); a framework which assists the reader in better understanding the current and future role of each.
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                    [post_content] => In February 2012, during a period of extremely cold weather across Russia and large parts of Europe, Gazprom failed to supply all the gas that was requested from it by its non-CIS customers in countries ranging from Poland in the north to Italy and Greece in the south of Europe. This situation led to concerns over a gas shortage and caused gas prices to spike at all the major hubs on the continent and in the UK. This Comment argues that the supposed supply “crisis” was not caused by any production shortfall in Russia but by a combination of inadequate storage available to Gazprom, excess gas withdrawal by Ukraine and in particular by political considerations in Russia ahead of the Presidential election in early March. However, it does highlight the current constraints to the Russian gas supply machine under certain severe temperature conditions. The paper also argues that, in contradiction to the claims of Alexander Medvedev (the Head of GazpromExport) that “spot markets failed to compensate for the increased demand”, in fact the markets had a logical price reaction to daily supply/demand changes. Although this reaction resulted in sharply higher prices in the short term, this provided a potent commercial signal which in turn led to spot supplies and/or demand management and then, as the situation resolved itself, produced lower prices so that the monthly average was still below the oil-indexed average price. While it is certainly true that the mature hubs at NBP and TTF reacted in a more responsive manner than some of the Continent’s less liquid hubs, it was nevertheless the case that, overall, customers were supplied at a market price and traders were able to arbitrage a short-term supply and demand imbalance.
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                    [post_content] => In this paper, we examine the evolution and functioning of the traded gas market in Great Britain.1 We will begin by looking at the historical background and the reasons why a successful liberalised gas market was able to develop in Britain. We will look at the Network Code and the National Balancing Point and examine their importance in facilitating an efficient wholesale market, effective balancing and nominations, before turning our attention to how the traded market actually functions. We will examine natural gas as a physical and as a traded commodity, analyse the market structure, (supply, demand and liquidity), explain the different routes to market, and the contractual documentation needed to trade. We will review the price drivers in the British market, looking at the three main phases of the bilateral contracts, contract indexation and the role of LNG and other commodities in natural gas pricing, culminating in a review of the trading dynamics in Britainand in Europe. Finally, we will examine the commercial prospects for the British gas market as it transitions from the 2000s to the 2010s and beyond in a changing global gas environment.
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Latest Publications by Patrick Heather

Latest Tweets from @OxfordEnergy

  • New OIES paper on India's gas market post-COP21 https://t.co/vAuYnFYZ0f https://t.co/M17eWF8sZ1

    June 27th

  • J Henderson & A Mehdi on Russia's Middle East Energy Diplomacy & How Kremlin Strengthened Its Position in the Region https://t.co/RVOSkX09JM

    June 27th

  • New publication: India’s Gas Market Post-COP21 https://t.co/fpAWwAzvm2

    June 26th

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