European Wholesale Gas Market Development

European Wholesale Gas Market Development published by Datamonitor in February, 2010. This report consists of 33 pages and the price starts from US $ 2795.

Introduction

Abstract

Introduction

Europe' s wholesale gas markets remain at widely differing stages of development with levels of liquidity and price efficiency varying widely between markets. As liberalisation develops further, increasing numbers of players will be seeking to utilise these markets to source their gas supplies. This brief examines the current status of these markets, and also analyses their future prospects.

Scope of this research

• A detailed review of the levels of development and liquidity currently prevailing in Europe' s wholesale gas markets.
• Insight into how the relative positioning of each of these markets is likely to change in the short to medium term.

Knowledge of the factors driving wholesale market development and the associated factors supporting market efficiency.

Research and analysis highlights

Datamonitor segments wholesale maturity and liquidity into four distinct categories. Currently, Europe' s wholesale gas markets cover the full spectrum of the developmental segmentations - nascent, emerging, established and mature.

As liberalisation develops, and as the resultant gas needs of new market entrants increase, there is significant scope for rapid development in the nascent and establishing markets to grow rapidly.

A number of countries are likely to see a renaissance in their levels of wholesale market development in the coming years. One particular example of this is Germany where high levels of retail market fragmentation, amongst other factors, means that the German hubs have significant near term developmental potential.

Key reasons to purchase this research

• Gain an understanding of current and future wholesale gas procurement options in the liberalised European market.
• Understand the degree to which individual wholesale markets are efficient at conveying pricing signals.
• Track the likely development of European wholesale liquidity and the resultant opportunity for efficient wholesale trading and procurement.

Table of Contents

DATAMONITOR VIEW

• CATALYST
• SUMMARY
• Sources

ANALYSIS

• Wholesale gas hub development will lead to further competition, enhanced security of supply and greater market efficiency
  • The EU continues to strive for greater competition by promoting a single, integrated wholesale gas market
  • The market' s traditional pricing mechanisms present obstacles to competition
  • The development of wholesale hubs and more gas-on-gas pricing will lead to greater security of supply
  • Adequate levels of liquidity on wholesale hubs are integral for the development of a competitive European gas market
  • The development of wholesale markets tends to follow a preset pattern of distinct stages
  • The wholesale market development cycle gradually builds up enough momentum to spawn the creation of wholesale support services
  • Once sufficient structural factors are in place, the necessary support services required for wholesale market development begin to emerge
  • The market based factors supporting hub development are crucial elements in facilitating and developing traded markets
  • Wholesale gas markets are required by different players throughout the value chain for different reasons
  • Currently Europe' s wholesale gas markets cover the full range of developmental stages
  • Datamonitor segments wholesale maturity and liquidity into four distinct categories
  • Europe' s current wholesale gas markets cover the full spectrum of segmentations
  • Analysis of levels of churn provide an insight into levels of liquidity and wholesale market development

• Current levels of churn in individual wholesale markets vary significantly
  • The NBP' s maturity, deep liquidity and strong volume growth has led to the hub' s position as Europe' s leading gas market
  • Historically, the Zeebrugge has been Europe' s second most liquid hub
  • The TTF has experienced remarkable liquidity growth and continues to challenge the Zeebrugge in traded volumes
  • Although having the potential to emerge as a key wholesale trading hub the CEGH is limited by its single source of gas supply
  • Europe' s emerging wholesale gas hubs continue to expand in both traded volumes and liquidity
  • Europe' s nascent markets are seeing renewed impetus towards development

• Price efficiency levels in the European wholesale markets show varying ranges of volatility
  • Datamonitor' s Deviation Days Index measures price movement ranges and gives insight into levels of price efficiency
  • Levels of volatility in the established markets have been decreasing markedly

• The polarization of the markets will reduce in the wake of market opening
  • Datamonitor forecasts future levels of wholesale liquidity by examining a range of structural factors on a weighted average basis
  • The structural factors used to predict wholesale market development produce a sliding scale of scores
  • Wholesale market development potential varies widely across the EU 27 gas markets
  • The markets categorized in the limited progress grouping lack the necessary structural factors required to catalyze wholesale activity
  • Despite showing some degree of progress, markets in the discernable progress segment will remain undeveloped
  • In addition to the three established markets, there are six countries in the substantial progress segment
  • The NBP is likely to maintain its sustainable advantage over the long term due to UK' s competitive spiral

APPENDIX

• Summary of Scores
  • Natural Gas-Based Infrastructure - Project Pipeline (some examples)

• Scoring methodology for Structural Factors used to rate markets
  • The “Impetus” metric examines the progress already made, and being made, towards the establishment of a wholesale market
  • The “Gas Penetration” metric examines the degree to which gas has made an impact to the energy mix of a specific country
  • The “Future Role of Gas Fired Power” metric has been used because gas fired power generators are often significant wholesale gas market users
  • The “Demand Growth” metric is used because demand growth can, in itself, be a key catalyst to wholesale activity
  • The “Wholesale Market Fragmentation” metric gives an indication of the potential impact on liquidity of upstream supplies and gas imports
  • The “Retail Market Fragmentation” metric provides insight on the impact on wholesale development of retail market players needing to source gas
  • The ‘interconnectivity' metric is used to highlight current and future opportunities for wholesale liquidity to be driven by cross-border trading

• Glossary
• Ask the analyst
• Datamonitor consulting
• Disclaimer

FIGURES

• Figure: Liquidity in natural gas markets, as defined by the International Energy Agency (IEA), incorporates four distinct market characteristics:
• Figure: The five distinct stages of wholesale market progression
• Figure: Wholesale support services emerge as the cycle builds momentum
• Figure: The interaction between structural and support factors creates a ‘snowball' effect
• Figure: The key support elements to wholesale market growth
• Figure: Different players engage in wholesale trading for different reasons
• Figure: Market Development in Europe
• Figure: Europe' s newer, less developed markets lag far behind the established markets in terms of churn ratios
• Figure: The NBP remains Europe' s most liquid traded wholesale market
• Figure: Both the TTF and Zeebrugge have high levels of liquidity and churn rates
• Figure: On balance, price volatility on the TTF and Zeebrugge has remained significantly lower than at the NBP
• Figure: Structural factors used by Datamonitor to determine wholesale liquidity
• Figure: Wholesale market development potential scale
• Figure: Development Scores
• Figure: The NBP' s competitive spiral
• Figure: Detailed breakdown of scores
• Figure: Gas - fired power generation and gas storage facilities
• Figure: Scoring scale
• Figure: Scoring scale
• Figure: Scoring scale
• Figure: Scoring scale
• Figure: Scoring scale
• Figure: Scoring scale
• Figure: Scoring scale

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