The introduction of IT services and platforms brought significant changes in gas trade in the member states of the European Union. This evolution is likely to take place also in Ukraine in the near future. At first sight these changes might sound as a burden, however, it is an opportunity where traders can secure various benefits – said our expert on the Third Ukrainian Gas forum held in Kyiv between 11th and 12th October 2017.
Today’s natural gas trading in Ukraine can be characterized by limited number of procurement venues. Contract structures both on the procurement side and end-customer side are relatively simple and there is relatively ample time for conducting the deals, settlement is monthly based. In the EU the introduction of IT services and platforms brought significant changes in gas trade in mid-term. This evolution is likely to take place in Ukraine in the near future, therefore we sum up briefly for the traders what was the overall experience of the natural gas market transition in the EU.
The emergence of centralised trading platforms enabled the speeding up of natural gas trade. They provided opportunity for the shippers’ to balance their portfolio before real time, and also supported the short term market to become more and more a sourcing venue besides bilateral long term trades. Furthermore, these platforms provided the possibility to conduct financial deals as an addition to the physically delivered deals. Finally, the inclusion of clearing houses managed counterparty risks. In sum, commercial gas in the EU is now traded faster and more parties are involved before gas reaches the end-user.
Switching from monthly cycles to daily operations
As far as every day trading operations became more complex, so the continuous digital communication with the? TSO became essential and more necessary. Nominations have gradually changed from monthly nominations up-to hourly nominations and re-nominations. The time-period of imbalance settlement had shortened to daily and in some countries even to hourly settlement.
In parallel and in support of the development of the short term gas markets the transportation part became also more sophisticated. Today transportation rights are operating as tradable and summable capacity products. These capacity products provide a wide range of variety for traders to choose what meets their needs the most. Today shippers manage a complex portfolio of transmission capacity products: separately for entry and exit points within day, daily, monthly, quarterly, annual, etc. The procurement of such products is platform and auction based, and also the secondary trade of these products is an option as well.
With the increase of opportunities and the variety of products (natural gas, transmission capacity, flexibility) the daily trading business processes became more complex what resulted first of all in the increasing complexity of the portfolio management. As gas trades switched from monthly cycles to daily operations, pace started to matter. As the opportunities and the speed in the gas trading increased, so did the competition – it became even more tougher. Therefore, only those shippers gained competitive advantage who knew their market and reacted fast to new market circumstances.
At first sight these changes might sound as a burden, however, it is an opportunity where traders can secure various benefits: transparency, reliability, traceability, internationalisation and integration with the EU natural gas markets. Digitalization is right around the corner.