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European Wholesale Gas Markets: Current Status and Future Trends

  • Publication Date:February 2007
  • Publisher:Datamonitor
  • Product Type: Brief
  • Pages:21

European Wholesale Gas Markets: Current Status and Future Trends

Introduction

The various wholesale gas markets in Europe are at widely differing stages of development. They range from the UK's NBP market which is highly liquid and efficient to markets such as the Austrian CEGH or Spanish CDG markets where liquidity is barely established. This brief examines the current status of these markets and also highlights how they are likely to develop over the coming five years.

Scope

  • Insight into the current level of liquidity, trading activity and development currently prevailing in Europe's wholesale gas markets
  • Analysis of nascent and emerging markets where liquidity is currently weak or barely existent
  • Visibility on likely competitive development dynamics in these wholesale markets, the likely evolution of liquidity and the prospects for growth
  • A conceptual framework of wholesale market development, evolution and the pivotal stages of wholesale market evolution

Highlights

The UK's NBP market will continue to lead European wholesale gas liquidity in the coming years. It currently accounts for around half of the liquidity in Europe's three main established wholesale markets. Going forward, further liquidity growth can be expected, though this will occur at a far slower rate than the newly emerging markets

Despite continued growth in both trade volume levels and the number of counterparties, the Zeebrugge market is increasingly in danger of losing its second place position in European liquidity. In two of the last three months of 2006, larger volumes of gas were traded on the TTF than on the Zeebrugge market

Undeveloped wholesale gas markets are developing at widely differing rates across Europe. The future prospects for these markets remains diverse. Markets such as the French PEG market have considerable growth potential in the short term. Conversely markets such as the Spanish CDG market will remain limited in scale for the foreseeable future

Reasons to Purchase

  • Understand current levels of liquidity in both established and non-established wholesale gas markets
  • Gain insight into the likely evolution of these wholesale markets as an input to longer term market entry analysis
  • Segment the levels of competitive development achieved in European wholesale gas markets
  • Catalyst
  • Summary
  • Analysis
    • A number of structural factors are required in order to catalyse the development of wholesale gas markets
    • 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 sufficiently 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
    • Europe's three established wholesale gas markets continue to develop
    • Existing levels of wholesale market development vary widely across European gas markets
    • The UK accounts for around half of the liquidity in Europe's three main established wholesale gas markets
    • The NBP remains Europe's most established wholesale gas market and is continuing to develop
    • despite continued growth, the Zeebrugge market is increasingly in danger of losing its second place position in European liquidity
    • The TTF market has seen liquidity grow rapidly and continues to vie with Zeebrugge to be Europe's second most liquid gas market
    • Emerging and nascent wholesale markets are developing at widely differing rates
    • since its inauguration in 2004, the French PEG market has seen a steady upward increase in liquidity
    • PEG market liquidity has been driven by market developments including the creation of a standard trading contract
    • PSV liquidity has shown significant growth in the past year, though remains very much an emerging rather than established market
    • The Spanish CDG market remains in a nascent state, with few indications of any short term growth in liquidity
    • The removal of destination clauses in OMV's contract with Gazprom has helped catalyse increased liquidity at the CEGH hub
    • Austria's CEGH hub saw a huge increase in traded volume in 2006, though still lags far behind other European wholesale gas markets
    • Germany's wholesale gas activity goes back as far as 2002, though the market remains far from liquid
    • Recently, a number of new wholesale gas trading hubs have begun to emerge in Germany
    • The future outlook for wholesale gas markets in Europe remains highly diverse
    • French wholesale gas liquidity is likely to see significant growth in the period post 2007 owing to a number of market developments
    • Liquidity at the PSV is likely to continue growing as a result of increased volumes of competitive gas finding its way to the market
    • New network access rules and the launch of a gas exchange will drive German gas liquidity significantly forward in the short term
    • The outlook for Spanish wholesale gas liquidity development remains extremely modest in the short to medium term
    • The prospects for short to medium term growth in the CEGH are extremely limited
    • over the coming five years there are likely to be a number of changes in the status segmentation of European wholesale gas markets
  • Appendix
    • Definitions
    • Further reading
    • Ask the analyst
    • Datamonitor consulting
    • Disclaimer
  • List of Figures
    • Figure 1: The five distinct stages of wholesale market progression
    • Figure 2: Wholesale support services emerge as the cycle builds momentum
    • Figure 3: The interaction between structural and support factors creates a "snowball" effect
    • Figure 4: The key support elements to wholesale market growth
    • Figure 5: Different players engage in wholesale trading for different reasons
    • Figure 6: The UK leads the rest of Europe in terms of wholesale market development
    • Figure 7: Traded volumes in all three of the main European wholesale markets continue to grow
    • Figure 8: Traded volumes at the NBP continue to grow
    • Figure 9: Traded volumes on the Zeebrugge market continue to grow
    • Figure 10: TTF traded volumes have shown rapid growth, particularly at the end of 2006
    • Figure 11: Traded volumes at the PEG market doubled during 2006
    • Figure 12: following love volumes in its first year, the PSV has since seen rapid liquidity growth
    • Figure 13: despite a strong increase in traded volumes in 2006, CEGH liquidity remains limited
    • Figure 14: All markets are expected to move up the wholesale segmentation scale in the coming five years
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