Patrick Heather

Senior Research Fellow

Patrick Heather, Senior Research Fellow, 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 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); ‘The SPIMEX Gas Exchange: Russian Gas Trading Possibilities’ a paper co-authored with James Henderson and Tatiana Mitrova (Jan 2018) exposed the path that Russia is taking in developing a traded gas market; the comment co-authored with Thierry Bros ‘French gas customers face a real risk from a No Deal Brexit’ examined the risk that a No Deal Brexit could have very serious and immediate consequences for the French economy (February 2019); his paper ‘A Hub for Europe: the Iberian Promise?’ (March 2019) focused on whether the Iberian Peninsula could be a ‘gateway’ for more diverse supplies of gas to Europe; the Insight ‘European Gas Hubs: a decade of change’ (July 2019) reviewed the progress of European hubs’ development over the whole decade, including the smaller and emerging hubs; there followed a Comment ‘European Traded Gas Hubs: the supremacy of TTF’ (May 2020), which detailed how the Dutch TTF has become the European hub as well as a global price marker; and another comment ‘European Traded Gas Hubs: German hubs about to merge’ (July 2021), not only gave an update on the status of all the European gas hubs but focused on the imminent merger of the two German hubs as well as analysing the relative liquidity of the three main global gas price benchmarks; the initial performance of the new German hub was reviewed in the comment ‘European Traded Gas Hubs: German THE fails to impress’ (December 2021); his latest Insight is part of a trilogy of papers published by the Institute, ‘A series of unfortunate events: the role of the traded gas hubs’ (March 2022) reviews the possible trading reasons behind the unprecedented gas prices and market volatility during 2021.

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 EBRD, the IEF, the IOGP, the APX, CQPGX, GME, ICE, Henex, SHPGX and Spimex exchanges, and various producer and end user companies, financial institutions, regulators, and governments in Australia, Austria, Belgium, Brazil, Britain, China, Estonia, France, Greece, Holland, India, Italy, Japan, Malaysia, Norway, the Philippines, Poland, Romania, Russia, Sweden, Switzerland, Turkey and Ukraine. 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. Prior to 2004, Patrick established PowerGen’s (now E.on UK) gas trading capabilities and later set-up their electricity trading desk; he later joined BG Group as Trading Manager to set-up their trading capability from scratch. Patrick has 40 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

The liberalisation and development of the traded gas hubs in Europe; the emerging Asian hubs; the global LNG market; physical and financial trading and risk management.

Contact

Tel: +44 (0)777 1946334
Fax: +44 (0)1865 310527
Email: [email protected]

This Paper gives the results of the Author's in-depth analysis of the European traded gas hubs in 2020, as well as explaining the 'LNG effect' on increased volumes in Belgium, France, and Spain in particular. The purpose of the analysis is to confirm that the hubs are all still relevant despite the recent upheaval in the energy markets, and that the TTF price in particular is still representative of the gas flowing in the grid.

The European gas markets have experienced a very turbulent ride over the past three years which has resulted in a severe readjustment of the European traded gas markets. There have been ongoing political and energy industry debates regarding not just the future of natural gas in the energy mix, but also how to resolve the immediate problem of ‘replacing’ Russian gas for Europe’s demand needs now and for the next few years?

Politically, there have been a number of interventions suggesting that the traded gas markets and the Dutch Title Transfer Facility (TTF) hub in particular, are no longer representative of the price of natural gas in the grid.

The purpose of this Paper is to analyse the results of the trading data in 2022 for the European traded gas hubs, in order to be able to assess whether these hubs continue to be relevant, or not, in the pricing of long term physical gas contracts? It will look at the TTF in particular, as this hub has for several years now been the most liquid by far in Europe, and has been widely used as the reference price for physical wholesale gas contracts.

From the analysis carried out in this paper, there is no doubt that several of the European hubs do provide the right pricing signals in their respective markets, and even provide the ability for market participants to risk manage some of their portfolio exposures. On a global level, the analysis shows that the TTF is truly the leading pricing benchmark for North-West Europe and indeed many other European countries also, as well as being used to price some LNG cargoes destined for Europe. It has become an investment asset class in its own right and there are signs that it has become a global benchmark too.

The final conclusion of this paper is that all European traded gas hubs are most definitely still relevant, if only to enable the safe and efficient balancing of the gas grids; but they can also be much more than that. Some are relevant for actual local market pricing, whether wholesale or retail, and possibly for limited (mainly short term) risk management purposes.

The Dutch TTF though is all those things, and is also used by a great many market participants, from all around the world, as a reliable price marker for several surrounding European countries, as well as on a wider scale across Europe, and even globally. Yes, the TTF in particular does continue to be relevant in the pricing of long term physical gas contracts and, yes, it is still representative of the price of gas in the Dutch, and wider European, grid network at any given time.

[post_title] => European Traded Gas Hubs: their continued relevance [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => european-traded-gas-hubs-their-continued-relevance [to_ping] => [pinged] => [post_modified] => 2023-10-27 09:27:45 [post_modified_gmt] => 2023-10-27 08:27:45 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=46304 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [2] => WP_Post Object ( [ID] => 44723 [post_author] => 111 [post_date] => 2022-03-24 12:25:15 [post_date_gmt] => 2022-03-24 12:25:15 [post_content] => The dramatic rise in European, and indeed in global, gas prices over the summer of 2021, leading to unprecedented prices in Q4, has been the subject of much debate. Is it simply a market reflection of stronger than expected demand and weaker than expected supplies? Or is it a step change in the context of the energy transition and uncertainties surrounding the role of gas as a ‘balancing fuel’ in power generation? Is this the price of flexibility and growing exposure to global LNG markets? What role did Russian supplies (or lack thereof) play in the price spike and to what extent did volatility on the traded markets exacerbate the price increases? In this OIES trilogy titled ‘A series of unfortunate events’, Jack Sharples, Patrick Heather and Anouk Honoré look back at 2020 and 2021 to unpack the supply and demand factors that contributed to the spike in European gas prices alongside the trading activity and levels of volatility that accompanied this surge in prices. This Insight analyses the role of trading activity in the gas markets over the past two years, and especially over the course of 2021 as prices grew steadily between March and August, followed by the extremely rapid growth from late August to the first peak in early October, and the very volatile trading during Q4-21 which resulted in the second, unprecedented peak. It forms part of a trilogy of papers published by the OIES, examining the supply, demand and trading reasons behind these unprecedented price levels. There have been some extreme price moves in the past, but these tended to be quite short-lived and generally affected just one or a few hubs; what happened during 2021 was very different, a long and protracted price rise in all contracts along the curve, culminating in the highest ever gas prices, which were over three times greater than the highest ever crude oil price. There were several physical reasons for the rally but they alone do not account for the higher prices. The trading patterns were really quite different from Q4-20 onwards compared to previous years. They suggested that traders, having filled storage to very high levels with cheap gas during 2020, chose to withdraw it early for their winter needs rather than pay the gradually increasing gas prices (due to the severe weather in Asia raising LNG prices); when the usual reinjection cycle would normally start, global gas prices continued to rapidly rise and traders were left in a position of having to buy physical gas for their portfolios, and gas to place in storage, in a rising market, whilst at the same time performing hedging to manage their price risks. there was also a pronounced move away from OTC trading (which had already started during 2020) towards exchange trading. This indirectly had the impact of pushing already high gas prices even higher: through the clearing mechanism, which requires traders to deposit initial margins for every trade made, and variation margins whilst those positions remain open when the direction of market prices goes against their net positions. In a rapidly rising market, this can lead to a drain on companies' financial resources if they hold short positions, and it was reported on several occasions that companies were struggling to pay their margin calls, or needed to borrow to incrtease their capital funding. Furthermore, if traders bought back their shorts, this would push the market higher still. These factors, on top of the various supply and demand factors which were analysed in the other two papers in this trilogy, created a 'perfect storm' of events that led to the unprecedented 7-month sustained rise in the TTF wholesale gas price by over €100/MWh from early March to early October 2021, resulting in the first recoed peak of €116.78/MWh; following a 50% retracement and some price consolidation, a second massive rally over just two weeks took the price to a second, and new all-time high of €180.31/MWh on 21st December. Alongside the unprecedented rise in prices, there has also been an unprecedented rise in the year on year price change and the market volatility. The steepest annual price changes were in the European and Asian prices, increasing about seven-fold in August and November 2021respectively, compared to the same period in 2020. However, the additional global demand for US LNG has prompted a smaller rise in the benchmark HH price, albeit still nearly three times dearer in October 2021 as it was a year earlier. With the market trading in very erratic moves, with both many sharp troughs and many peaks, the average volatility in the period from 1st July 2019 to 20th June 2021 jumped to 71.23%, and the average volatility increased even more from 21st June 2021 to 15th February 2022, reaching 103.87%. This period contained the second major spike in volatility on 7th January 2022 of 223.57%. These are truly incredible and unprecedented levels of volatility and, as with the outright traded prices, are much higher than those of Brent crude oil. In conclusion, 2021 turned out to be the most turbulent year ever in the history of the liberalised traded gas markets: unprecedented price levels after one of the longest sustained rallies and two sharp retracements, unprecedented six fold year on year price rises, unprecedented high levels of volatility making natural gas the most volatile commodity by far and, possibly, some of the greatest trader uncertainty also. The geopolitical situation with Russia and confusion over the climate targets and how to achieve them, with or without natural gas in the mix, is adding to these levels of uncertainty. It is still very unclear whether we are in a new price era, due to this series of unfortunate events over the past two years, and due to the continuing geo-political tensions, or are we just in an exceptional bubble? The question is whether these levels of price and volatility are simply a short-lived aberration, or are a new normal? [post_title] => A Series of Unfortunate Events - Explaining European Gas Prices in 2021: The role of the traded gas hubs [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => a-series-of-unfortunate-events-explaining-european-gas-prices-in-2021-the-role-of-the-traded-gas-hubs [to_ping] => [pinged] => [post_modified] => 2022-03-24 12:25:15 [post_modified_gmt] => 2022-03-24 12:25:15 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=44723 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [3] => WP_Post Object ( [ID] => 44388 [post_author] => 111 [post_date] => 2021-12-09 13:17:44 [post_date_gmt] => 2021-12-09 13:17:44 [post_content] => This Comment questions the official statements made in the German energy Act and in the NCG/GPL joint press release, regarding the creation and start of the new merged German gas hub, the Trading Hub Europe (THE). Those comments boldly stated that the new THE hub would be “one of the most attractive and liquid gas trading hubs in Europe […], providing excellent opportunities for future growth”. Following on from the analysis of trading data from January to October 2021 for the traded gas hubs in a selection of seven west-European countries, and after just one month’s data available for the merged THE, this paper analysed whether there are indeed signs that the German market is developing into an ‘international’ hub or whether it is simply ‘business as usual’? It could be argued that the German hubs could or indeed should have already performed better over the past decade. The reality is that they did not., despite Germany having Europe's highest physical gas demand, having a comprehensive gas pipeline and storage infrastructure, and having good connections with all the neighbouring countries. These attributes should have enabled the traded gas markets to flourish, yet compared to some other countries, they did not and the two German hubs remained essentially where they were five years ago. If the NCG and GPL hubs had not developed more than they had due to there being two hubs in Germany rather than one, simply merging them was unlikely to succeed in creating a more liquid market, as the French experience of hub mergers showed. In reality, the total traded volumes of the combined German hubs fell 12.45 per cent from 2019 to 2020 and a further 6.55 per cent from 2020 to 2021, making a drop of 18.19 per cent over the two-year period. This is a significant drop, worse than the 10.3 per cent drop at the French TRF and much worse than the 5.2 per cent increase in total traded volumes at the Austrian VTP, and in total contrast to the 33 per cent rise in TTF traded volumes in the same 2-year period. Despite the extreme and unprecedented rise in gas prices over the summer of 2021, leading to very high levels of volatility and pushing traders towards the exchange contracts in general, and the very liquid TTF in particular, there have not been any encouraging signs of growth in the German traded gas market. The new THE hub’s biggest rival is the TTF, and the one to ‘catch up’ if the statements were indeed to come true; the churn rates are far from reflecting a mature liquid market, the total traded volumes are reasonable and are ‘the best of the rest’ after TTF and NBP but, it must be stressed that the TTF volumes are just short of eighteen times larger than THE! Given all the statistical trading data, There is no reason to believe at this stage that the new German THE hub could ever challenge TTF to become the European benchmark hub. The final conclusion of this Comment therefore is that, as previously stated by the Author, the new German Trading Hub Europe is still very unlikely to reflect its name. [post_title] => European Traded Gas Hubs: German THE fails to impress [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => european-traded-gas-hubs-german-the-fails-to-impress [to_ping] => [pinged] => [post_modified] => 2021-12-09 13:17:44 [post_modified_gmt] => 2021-12-09 13:17:44 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=44388 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [4] => WP_Post Object ( [ID] => 43861 [post_author] => 111 [post_date] => 2021-07-08 11:08:13 [post_date_gmt] => 2021-07-08 10:08:13 [post_content] => This Paper gives the results of the Author's analysis of the European traded gas hubs in 2020, as well as discussing the trading prospects for the new merged German gas hub, the Trading Hub Europe which is due to be operational from October 2021; it also compares the global gas benchmarks, Henry Hub, TTF, NBP and JKM. The merger of the German NCG and GPL hubs into one national hub is the culmination of a process of rationalisation started in 2008 when there were still 19 gas balancing zones. The stated aim of the Federal law which has mandated the merger is to increase liquidity in the gas market, and the German TSOs have the ambition for the new hub to be an international hub linking the German with other European gas markets. Given the country's large physical consumption and total physical throughput, this should be a possibility but begs the questions of why the NCG and GPL have not developed more than they have and whether, if that is due to there being two hubs rather than one, simply merging them will now have the desired effect? Unfortunately, the statistical data and the French experience of hub mergers suggest that it will struggle to succeed. On the wider European level, the vision set out some 20 years ago of a fully liberalised traded gas market is now almost fulfilled, with just a few more changes needed to be made, especially in eastern and south eastern Europe. The results of the 5 Key Elements for 2020 show an overall increase in European traded volumes, although not all hubs benefited. The TTF has consolidated its position at the top of the rankings and has increased both its 'net' and 'gross' churn rates; it is a mature and very liquid hub. At a global level, Henry Hub is the most liquid traded benchmark gas hub. TTF (and NBP to a lesser extent) is an important benchmark in its own market area and is also a benchmark for its region. JKM is the leading price market in Asia. The final conclusion of this Paper is that the political will in Ukraine could see it become a SEE regional hub in the future; that the TTF is most likely to remain the European gas price benchmark as well as a global benchmark; and that the new German Trading Hub Europe is very unlikely to reflect its name. [post_title] => European Traded Gas Hubs: German hubs about to merge [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => european-traded-gas-hubs-german-hubs-about-to-merge [to_ping] => [pinged] => [post_modified] => 2021-07-08 11:08:13 [post_modified_gmt] => 2021-07-08 10:08:13 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=43861 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [5] => WP_Post Object ( [ID] => 37906 [post_author] => 111 [post_date] => 2020-05-20 10:12:14 [post_date_gmt] => 2020-05-20 09:12:14 [post_content] => This Comment gives the results of the Author's analysis of the European traded gas hubs in 2019, according to his 5 Key Elements and also introduces a global churn comparison between Henry Hub, TTF, NBP and JKM. Previous publications by this author have shown how the once dominant NBP has started to lose its crown, only to be superseded by the TTF and this is borne out in this Comment. The NBP is still a mature and quite liquid gas hub but the traded volumes have taken a tumble since 2017; however, it is clearly still the reference pricing hub for Great Britain, Northern Ireland and the Republic of Ireland and some LNG cargoes into Europe. The Belgian hubs, especially the Sterling priced ZEE, have struggled in a competitive market and are rapidly losing ground in the European rankings, while the German hubs have shown very slow progress over the decade, especially considering the size of their physical market. The French TRF has followed a similar trajectory and is still classified as a ‘poor’ hub. On a positive note, the Italian PSV is continuing the strong growth trend started in 2014, albeit from a low base, and now is ranked equal 4^th alongside the German GPL. It is the hub currently showing the most promise for further development. The emerging hubs are serving a purpose to facilitate balancing in their respective countries but still have very far to go on the path to maturity. The main message though in this Comment is that TTF has seen phenomenal growth in the last three years, in every metric: TTF is the European hub that has the greatest number of market participants, trading the widest range of products over the entire curve. It traded by far the largest volumes of all the hubs in all the product categories and has by far the highest churn rate. At a global level, TTF and NBP are important benchmarks in their own market areas but they are also benchmark hubs for their regions and for the pricing of LNG cargoes. The final conclusion however is that, in 2019, TTF is now quite simply the supreme traded gas hub in Europe as well as a global price reference. [post_title] => European traded gas hubs: the supremacy of TTF [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => european-traded-gas-hubs-the-supremacy-of-ttf [to_ping] => [pinged] => [post_modified] => 2021-06-23 10:33:24 [post_modified_gmt] => 2021-06-23 09:33:24 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=37906 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [6] => WP_Post Object ( [ID] => 34928 [post_author] => 111 [post_date] => 2020-01-30 14:11:31 [post_date_gmt] => 2020-01-30 14:11:31 [post_content] => The OIES Natural Gas Quarterly aims to provide a regular insight into the thoughts of Research Fellows on topical issues as well as providing a different angle on trends in global gas pricing. In the pricing section, the Quarterly reviews the LNG Tightness measure, looks at the Russian gas export price to Europe versus the marginal cost of US LNG and also reviews prices on Gazprom’s Electronic Sales Platform (ESP). In Asia we compare the Japanese LNG import price with the LNG spot price and also look at Chinese domestic prices compared with JKM. The Quarterly also outline our views on the Key Themes for 2020, including thoughts from Mike Fulwood on LNG project FIDs and how developers may need to accelerate plans if they are not going to miss the next window of opportunity in the mid-2020s. Mike Fulwood and Jack Sharples then question the availability of LNG for Europe and ask whether sufficient storage will be available to take all the possible supply. Anouk Honore then looks at a possible cause for optimism for European gas demand, highlighting key legislation that should be passed in 2020 concerning coal phase out in Germany. Continuing the European theme, Marshall Hall discusses likely further progress this year in the transformation of the Dutch gas market, while James Henderson considers the increasing diversity of Russian gas export flows via pipeline and LNG. Jack Sharples develops the theme of Russian gas exports further, suggesting that the Gazprom ESP can provide further evidence concerning the company’s export strategy in 2020. On a different, but still European, theme Anouk Honoré considers the potential impact of the new EU Green Deal and considers how it could be developed further during the year with potentially long-lasting consequences for the energy system. Martin Lambert then suggests that 2020 could be the year when we start to see more active progress in decarbonisation outside Europe, with Australia, Japan and even the US highlighted as possible sources of technology development and practical action in the decarbonisation of the gas sector. Michal Median then outlines her view on the outlook for the Chinese gas sector in 2020, suggesting that coal to gas switching could regain some momentum and that LNG could benefit as a result. Finally, Patrick Heather looks at the emergence of the JKM price marker as a benchmark for gas prices in Asia and suggests that further progress could be made this year towards it becoming the pre-eminent pricing tool in the region. [post_title] => Quarterly Gas Review - Issue 8 [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => quarterly-gas-review-issue-8 [to_ping] => [pinged] => [post_modified] => 2020-01-30 14:11:31 [post_modified_gmt] => 2020-01-30 14:11:31 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=34928 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [7] => WP_Post Object ( [ID] => 31773 [post_author] => 111 [post_date] => 2019-07-24 10:53:08 [post_date_gmt] => 2019-07-24 09:53:08 [post_content] => Following on from the comprehensive study undertaken by the Author in 2015 and the update published in 2017, this OIES Insight provides a further update on the maturity and development of European traded gas hubs, with particular reference to both the liquidity and pricing aspects of the hubs. As well as detailing the progress of all the European traded gas hubs in 2017 and 2018, this Insight will also look back over the past 10 years to see how the hubs have fared, whether there are any ‘winners’ or ‘losers’ and indeed, to see which countries are still to liberalise and which hubs to develop? In 2008, only 9 European countries had a traded gas hub and the only mature gas hub was the NBP; during the ensuing decade, new trading hubs were gradually formed as Member States started to follow the EU Energy Directives and, in particular, the Network Codes. However, there are still in 2018 7 countries without a traded gas hub. When comparing the situation in 2008 with 2018, the two most significant changes have been the changes in fortune for the NBP and TTF hubs: NBP finally lost first place to TTF during 2016, when the Dutch hub overtook it in total traded volumes and has continued to grow in the two years since. In conclusion, a decade of change has resulted in a ‘wider’ European gas market with more countries now implementing the Directives and much more gas trading overall. The rankings have changed, particularly mid-table, but the top two hubs in 2008 are the top two in 2018 but with their positions reversed; together they accounted for 89 per cent of total traded volumes in 2008 and for 87 per cent in 2018. The final overall conclusion to this Insight is that, after nearly 20 years, most EU Member States do now have a gas hub and it is hoped that the remaining 7 countries will abide by the Directives within the next 2-5 years. It is possible that by 2025 Europe may finally have a single gas market, of sorts. [post_title] => European traded gas hubs: a decade of change [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => european-traded-gas-hubs-a-decade-of-change [to_ping] => [pinged] => [post_modified] => 2019-07-24 10:53:08 [post_modified_gmt] => 2019-07-24 09:53:08 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=31773 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [8] => WP_Post Object ( [ID] => 31492 [post_author] => 111 [post_date] => 2019-03-28 11:50:16 [post_date_gmt] => 2019-03-28 11:50:16 [post_content] => In these times of heightening geopolitical tensions, can Iberia be part of the solution to diversify the Security of Supply of natural gas to Europe? For a number of years now, there has been growing concern amongst politicians of the dependence of Europe on Russian gas and there is growing pressure to find alternative supplies, both pipeline and LNG. Iberia has historically been seen as a ‘separate’ gas market but does have an extensive existing gas infrastructure, from LNG import terminals with overcapacity, to gas ample storage facilities, as well as having bi-directional pipelines to France. There are also a number of infrastructure projects that could, on paper, improve further the ability to provide extra wholesale quantities of gas into Europe. There is a political momentum from the European Commission and the Spanish government towards integrating the Iberian gas market to that of Western Europe; however, do they understand what it would take to become a “Hub for Europe”? The reality is that any such ambition must fulfil a need and provide the right results. The traded gas market has started to develop but will these developments towards a fully liberalised and commercial traded gas market lead to a joint Iberian gas hub that can price additional supplies of physical gas to Western Europe? [post_title] => “A Hub for Europe”: The Iberian promise? [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => hub-europe-iberian-promise [to_ping] => [pinged] => [post_modified] => 2019-04-30 11:48:06 [post_modified_gmt] => 2019-04-30 10:48:06 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=31492 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [9] => WP_Post Object ( [ID] => 31407 [post_author] => 111 [post_date] => 2019-02-13 11:32:58 [post_date_gmt] => 2019-02-13 11:32:58 [post_content] => Much is reported in the press on the UK government's struggle to negotiate the withdrawal agreement, and the main focus as we approach the deadline has been on the potential impact of a so-called No Deal Brexit on the UK economy. French energy law specifies that only companies based in the EU have the authorisation to supply gas in France; unless a specific agreement can be reached on this issue before the withdrawal date, all shippers on the French network based in the UK will, on 30th March, automatically lose their authorisation to supply gas in France. This situation concerns some 10 or so shippers who set up their trading desks in the UK, as the British fiscal regime was far more conducive to their activities than that in France. The French State is not willing, nor is it able, to fast track a change in the law to accommodate UK companies post-Brexit. The current situation shows how much still needs to be done, because the consequences are potentially major as the amount of gas 'at risk' is possibly up to 40 per cent of demand. [post_title] => French gas customers face a real risk from a No Deal Brexit [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => french-gas-customers-face-real-risk-no-deal-brexit [to_ping] => [pinged] => [post_modified] => 2019-02-13 11:32:58 [post_modified_gmt] => 2019-02-13 11:32:58 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=31407 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [10] => WP_Post Object ( [ID] => 30828 [post_author] => 111 [post_date] => 2018-01-22 11:25:03 [post_date_gmt] => 2018-01-22 11:25:03 [post_content] =>

The sale and purchase of Russian gas in the post-Soviet era has been dominated by the need for Gazprom, the dominant player, to sell to consumers at a regulated price. Since 1998 other producers, known in Russian legal terminology as the independents, have been able to sell gas at market prices, but these prices have always been heavily influenced by the regulated price because of the dominance of Gazprom’s volumes. Initially independent producers sold gas at a premium to Gazprom, due to the fact that the regulated price was set at a low level to provide a boost to industry and a subsidy to residential consumers, with the result that their sales volumes were limited and only went to customers with a need for extra gas to cover surplus demand, even at premium prices. However, during the past two decades regulated prices have risen significantly (see figure 2 below), largely due to pressure from Gazprom which asserted its need for higher revenues to underpin investments in new fields. The consequence has been that by 2012 independent producers were able to compete with Gazprom on price and win customers who historically had wanted to only pay low, regulated prices. Indeed, since 2012 independents have won significant market share from Gazprom and now account for around half of all gas sold on the domestic Russian market. This increasing price competition has underlined that the regulated gas price has effectively reached an equilibrium, at least partially reflecting the balance of supply and demand in Russia. However, the search for a market mechanism to reflect this situation has continued, with almost all transactions to date being bilateral deals between buyer and seller, largely on the basis of long-term contracts. Various means to relate gas prices in Russia to market reality have been tried since 2000, with varying degrees of success, but in 2014 the launch of a gas exchange in St Petersburg by SPIMEX, the St Petersburg International Mercantile Exchange, has offered the latest, and most serious, opportunity for a true market price to be established. This can have important consequences in Russia, where the SPIMEX price could eventually provide a benchmark for the domestic wholesale gas price and could also provide a foundation for further liberalisation of the gas market. Given the location of the exchange at one end of the Nord Stream pipeline, it could also impact the trading of gas exports to Europe. This latter opportunity remains some way from realisation, but nevertheless the development of more active gas trading in St Petersburg is a growing reality and deserves the attention of the wider gas community given its potential to connect two major gas markets and the possibility that it could play a role in easing relations between Russia and its gas customers to the west.

Latest Publications by Patrick Heather

19.07.23

Romania’s Neptun Deep FID: can it be a regional gamechanger?

In June 2023 Neptun Deep partners OMV Petrom & Romgaz took FID on this $4.4 bn project to monetise a recoverable gas resource of 100 bcm, with first gas scheduled for 2027. Annual production is projected to climb within a year to 8 bcma, and it will flip Romania from gas net importer to gas […]

By: Julian Bowden Patrick Heather

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28.06.23

European Traded Gas Hubs: their continued relevance

This Paper gives the results of the Author’s in-depth analysis of the European traded gas hubs in 2020, as well as explaining the ‘LNG effect’ on increased volumes in Belgium, France, and Spain in particular. The purpose of the analysis is to confirm that the hubs are all still relevant despite the recent upheaval in […]

By: Patrick Heather

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24.03.22

A Series of Unfortunate Events – Explaining European Gas Prices in 2021: The role of the traded gas hubs

The dramatic rise in European, and indeed in global, gas prices over the summer of 2021, leading to unprecedented prices in Q4, has been the subject of much debate. Is it simply a market reflection of stronger than expected demand and weaker than expected supplies? Or is it a step change in the context of […]

By: Patrick Heather

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09.12.21

European Traded Gas Hubs: German THE fails to impress

This Comment questions the official statements made in the German energy Act and in the NCG/GPL joint press release, regarding the creation and start of the new merged German gas hub, the Trading Hub Europe (THE). Those comments boldly stated that the new THE hub would be “one of the most attractive and liquid gas […]

By: Patrick Heather

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08.07.21

European Traded Gas Hubs: German hubs about to merge

This Paper gives the results of the Author’s analysis of the European traded gas hubs in 2020, as well as discussing the trading prospects for the new merged German gas hub, the Trading Hub Europe which is due to be operational from October 2021; it also compares the global gas benchmarks, Henry Hub, TTF, NBP […]

By: Patrick Heather

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20.05.20

European traded gas hubs: the supremacy of TTF

This Comment gives the results of the Author’s analysis of the European traded gas hubs in 2019, according to his 5 Key Elements and also introduces a global churn comparison between Henry Hub, TTF, NBP and JKM. Previous publications by this author have shown how the once dominant NBP has started to lose its crown, […]

By: Patrick Heather

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30.01.20

Quarterly Gas Review – Issue 8

The OIES Natural Gas Quarterly aims to provide a regular insight into the thoughts of Research Fellows on topical issues as well as providing a different angle on trends in global gas pricing. In the pricing section, the Quarterly reviews the LNG Tightness measure, looks at the Russian gas export price to Europe versus the […]

By: Mike Fulwood Jack Sharples Anouk Honoré Marshall Hall Martin Lambert James Henderson Michal Meidan Patrick Heather

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24.07.19

European traded gas hubs: a decade of change

Following on from the comprehensive study undertaken by the Author in 2015 and the update published in 2017, this OIES Insight provides a further update on the maturity and development of European traded gas hubs, with particular reference to both the liquidity and pricing aspects of the hubs. As well as detailing the progress of […]

By: Patrick Heather

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28.03.19

“A Hub for Europe”: The Iberian promise?

In these times of heightening geopolitical tensions, can Iberia be part of the solution to diversify the Security of Supply of natural gas to Europe? For a number of years now, there has been growing concern amongst politicians of the dependence of Europe on Russian gas and there is growing pressure to find alternative supplies, […]

By: Patrick Heather

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13.02.19

French gas customers face a real risk from a No Deal Brexit

Much is reported in the press on the UK government’s struggle to negotiate the withdrawal agreement, and the main focus as we approach the deadline has been on the potential impact of a so-called No Deal Brexit on the UK economy. French energy law specifies that only companies based in the EU have the authorisation […]

By: Thierry Bros Patrick Heather

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22.01.18

The SPIMEX Gas Exchange: Russian Gas Trading Possibilities

The sale and purchase of Russian gas in the post-Soviet era has been dominated by the need for Gazprom, the dominant player, to sell to consumers at a regulated price. Since 1998 other producers, known in Russian legal terminology as the independents, have been able to sell gas at market prices, but these prices have […]

By: James Henderson Tatiana Mitrova Patrick Heather Ekaterina Orlova Zlata Sergeeva

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31.05.17

European traded gas hubs: an updated analysis on liquidity, maturity and barriers to market integration

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. […]

By: Patrick Heather Beatrice Petrovich

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07.12.15

The evolution of European traded gas hubs

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 […]

By: Patrick Heather

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14.06.12

Continental European Gas Hubs: Are They Fit for Purpose?

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 […]

By: Patrick Heather

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16.04.12

Lessons from the February 2012 European gas “crisis”

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 […]

By: James Henderson Patrick Heather

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01.08.10

The Evolution and Functioning of the Traded Gas Market in Britain

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 […]

By: Patrick Heather

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Ongoing research by Patrick Heather

05.04.24

European traded gas hubs: the markets have rebalanced

This latest paper in the Author’s series on the European traded gas hubs will examine the trading results of those hubs in 2023 and assess whether the markets have ‘rebalanced’ after the prices and supply shocks of the previous two years.

By: Patrick Heather

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Patrick Heather

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Latest Publications by Patrick Heather

Romania’s Neptun Deep FID: can it be a regional gamechanger?

European Traded Gas Hubs: their continued relevance

A Series of Unfortunate Events – Explaining European Gas Prices in 2021: The role of the traded gas hubs

European Traded Gas Hubs: German THE fails to impress

European Traded Gas Hubs: German hubs about to merge

European traded gas hubs: the supremacy of TTF

Quarterly Gas Review – Issue 8

European traded gas hubs: a decade of change

“A Hub for Europe”: The Iberian promise?

French gas customers face a real risk from a No Deal Brexit

The SPIMEX Gas Exchange: Russian Gas Trading Possibilities

European traded gas hubs: an updated analysis on liquidity, maturity and barriers to market integration

The evolution of European traded gas hubs

Continental European Gas Hubs: Are They Fit for Purpose?

Lessons from the February 2012 European gas “crisis”

The Evolution and Functioning of the Traded Gas Market in Britain

Ongoing research by Patrick Heather

European traded gas hubs: the markets have rebalanced

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