Institutional and Organizational Designs of Natural Gas Hubs: An Introduction to the Iberian Gas Hub

1. IBERIAN GAS HUBIBERIAN GAS HUB
Services to NG and LNG traders
Bilbao, June 24th, 2014

2. Overview of our services in Iberia
Voice broking in the OTC market
(NG and LNG)
Forward market electronic platform
(physical OTC and cleared products)(physical OTC and cleared products)
Hub services (matching, title( g,
tracking, BUBD services, etc.)
Other services for traders
(e.g., REMIT reporting, etc.)
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3. Voice‐brokered products in the OTC market
Interconnection with FranceInterconnection with France
(TIGF-to-AOC and PEG Sud-to-
AOC swaps)
Baseload contracts with
delivery at the VTP/AOC
( d Y 1 d
LNG deals at
regasification
terminals in SP
IBERIAN GAS HUB
OTC SERVICES
• Professional approach to deal
negotiations and client
(next-day to Year+1 and
structured products)
terminals in SP
and POR (in tank,
DES, FOB)
negotiations and client
management and best practice
processes (LEBA)
• Fast access to counterparties with
commercial interests in Iberia
Contracts with
delivery on the
Portuguese T
network
commercial interests in Iberia
• Anonymous deal structuring and
aggregation of selling interests and
buying interests (NG and LNG)
Logistic swaps: (1) calendar
spreads (virtual storage at the
Parties to the deal
manage counterparty
risk, notifications to
the System Operators,
• Structuring AOC hedges or logistic
(swap) transactions, bundling
capacity+energy (if required), etc.
p ( g
VTP/AOC) and (2) location
spreads (virtual transportation
tank-to-AOC, etc.)
y p ,
etc., bilaterally,
according to their
Master Agreements or
contracts
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4. Examples of recent OTC deals
AOC t AOC P t A d li t t B b t 7 d 8 GWh/d t th
Virtual storage
AOC‐to‐AOC swap: Party A delivers to party B between 7 and 8 GWh/day at the
VTP/AOC in June + 2 GWh/day in July 2014 and party B returns between 6 and 7
GWh/day at the VTP/AOC in August 2014 (A pays a price to B for this service)
S l t t P t A d li 1 GWh/d t P t B t th VTP/AOC i Wi t
Winter 2014
Seasonal contract: Party A delivers 1 GWh/day to Party B at the VTP/AOC in Winter
2014 (Q4‐14+Q1‐15)
TIGF AOC
Interconnection swap: Every day from May 8th to May 16th, 2014, Party A delivers 1
GWh/d t P t B t TIGF d P t B d li 1 GWh/d t P t A t th AOC (ATIGF‐AOC swap GWh/day to Party B at TIGF and Party B delivers 1 GWh/day to Party A at the AOC (A
pays a price to B for this service)
Balance of
th
Short‐term balancing product: Party A delivers between 1.5 and 3 GWh/day to Party B
at the VTP/AOC from May 26th to May 31st, 2014 and B returns to A an equivalent
month swap
/ y y , q
amount in late August and early September 2014 (A pays a price to B).
• Safe deal confirmation process: Phone, email and official IBGH WE FACILITATE p ,
confirmation documents.
• Extra safety net for credit risk: Deals are closed subject to the
approval of the credit risk departments of the counterparties.
C
TRADING IN A
MATURING MARKET
ENVIRONMENT
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5. IBGH’s Trayport‐based electronic trading platform
Message board:
relevant information
to the market
Ready for operation since
the end of January 2014. We
now have a number of major
energy trading companies
d h l fto the market connected to the platform.
Trading to start with OTC
products initially.
Forward curve at the VTP (AOC)
Prices in all key infrastructures
and for logistic products
 Supports OTC and exchange (cleared) markets
 Standard, leading provider in European power and gas marketsStandard, leading provider in European power and gas markets
 Advanced, state-of-the-art trading funcionalities
 Reliable and robust, with a proven track record
 Connectivity with other markets and with clearing houses
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6. New products: cleared physical forwards
Description
Product definition
 Contract for the purchase/sale of natural gas with
physical delivery on the Spanish transmission network
Delivery point
 Virtual Trading Point of the Spanish transmission system
(AOC)(AOC)
Prices  Expressed in €/MWh (tick = 0.01 €)
Quantities
 Expressed in GWh/day or MWh/day (tick = 0.1 GWh or
100 MWh)
Delivery period  W+1, M+1, M+2, … , Q+1, Q+2, … , Y+1, …
Trading rules  According to the Iberian Gas Hub Rules of Operation
Guarantees and
financial settlement
 According to the settlement rules and guarantees of the
central clearing counterpartyfinancial settlement central clearing counterparty
Notifications to the
system operator
 One‐sided nominations by IBGH on behalf of the
counterparties
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7. How to contract our services
ClientsAll these documents
require signatures.
Master Agreement
for the provision of services by Iberian Gas Hub Rules of
Operation of
Technical
Connection
Contractual Annex
(OTC products)
Operation of
Iberian Gas Hub
(detailed
procedures and
processes)
Connection
Agreement
(electronic
trading services
only)
Contractual Annex
(exchange products)
A h i i d processes)only)
Signing the documents on
the left implies acceptance of
Authorisation to send
notifications to SO
Iberian Gas Hub (IBGH)
the left implies acceptance of
the Rules of Operation.
Certain annexes of the RoO
also require signatures.
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8. What next?
Continue to work with regulatoryContinue to work with regulatory
authorities, market agents and
system operators
Expand our client base (voice and
screen trading services)
Set up the foundations of an
organized forward market
Develop new market services (e.g.,
hub operator services)
Prepare for REMIT compliance
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9. Contact and more information
 Contact the Iberian Gas Hub trading desk at:
• Head of Trading Desk: Mr. Asier Escalada
E‐mail: aescalada@iberiangashub.com
Trading Desk: (+34) 946 124 275Trading Desk: (+34) 946 124 275
Cell (Asier): (+34) 607 756 678
• Front Office Manager: Mr. Jorge Fernándezg g
E‐mail: jfernandez@iberiangashub.com
 More information at:
www.iberiangashub.com
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10. Thank you!Thank you!
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