The document discusses establishing a proper gas trading hub. It provides an overview of the Belgian gas trading landscape and the Zeebrugge hub's development over time. The Zeebrugge hub was established in 1999 and has evolved its services and agreements to increase liquidity and meet market needs. It now includes both physical and notional trading points. Key factors for hub success include sufficient infrastructure, many buyers and sellers, standard contracts, and responsive evolution to the market.

1. 1
How To Establish A Proper Working
Gas Hub?
Bilbao – 24th June 2014
HUBERATOR - Laurent Remy

2. AGENDA
 INTRODUCTION
 BELGIAN TRADING LANDSCAPE
 OPERATIONAL REVIEW
 CONCLUSION
2

3. INTRODUCTION
3

4. WHO IS HUBERATOR?
 A non-regulated company established in 1999, with a strong
shareholder base
 The operator of both Zeebrugge Beach (physical trading point)
and Zeebrugge Trading Point – ZTP (notional trading point)
4
Fluxys is a Belgium‐based, fully independent gas infrastructure
group with assets in gas transmission, gas storage
and LNG terminalling throughout Europe

5. HUB DEFINITION
 A hub is a point (physical/local or virtual/notional) at which title
to gas can be transferred between buyers and sellers
 In a physical hub, the contractual place where the gas is
exchanged corresponds to a specific and well identified
geographical point on the transmission system (Zeebrugge
Beach)
 In a notional hub, the contractual place where the gas is
exchanged is being defined as a group of entry and exit points
belonging to a whole transmission system or balancing zone
(e.g. ZTP, TTF, NCG, GASPOOL, NBP)
 Both types must ideally allow OTC transactions (either bilaterla
or preferably through brokers) and Exchange trading (on
anonymous platforms).
5

6. Infrastructure
Systems & Commercial
Arrangements
Convergence of Pipelines & Available
Transmission Capacity
Many Buyers & Sellers with Available
Commodity
Access to Tradable Gas, End-Users and
Storage
Easy Transport to/from Hub
Hub services Agreement (& Ops rules)
Market Maker
WHAT DOES IT TAKE TO DEVELOP A HUB?
Standard Trading Contract
6

7. COMMERCIAL REQUIREMENTS
 The hub operator has a standard hub agreement in place with
its hub customers (Hub Services Agreement - HSA)
 The HSA is supplemented by Operating Procedures
(exchange of messages, matching rules, curtailments…)
 The main components of the HSA are:
- Tariff (Fee structure)
- Services
- Liabilities, FM, amendments…
 Hub customers (as the case may be assisted by the hub
operator) jointly develop or abide by a standard trading
contract to trade at the hub
- Initially ZBT 2004, followed by ZBT 2012
- ZBT gradually overtaken by EFET General Agreement (vast
majority of transactions at Zeebrugge Beach are EFET based)
with a specific ZBT annex.
7

8. OPERATIONAL REQUIREMENTS (1)
 The hub operator must be a separate legal entity from
customers at the hub, so all participants should be treated on
a non-discriminatory basis
 Standard hub terms and conditions are published
 No market dominance by a single market participant
 Title transfer services are provided by the hub operator
- Nominations
- Title tracking (tracking the change in ownership of gas volumes)
- Matching
- Confirmation
- Allocation
- Monthly reporting
8

9. OPERATIONAL REQUIREMENTS (2)
 Hub operator provides firmness through back-up and offtake
services with transparent and market-based charges (to make
traded quantities firm in case of physical disruption up- or
downstream the hub)
 For physical hubs, hub operator needs to ensure a high level
of interoperability in cooperation with the operators of the
adjacent systems (e.g. renomination lead-time)
 Ideally, hub prices are used in the settlement of transportation
imbalances, in order to foster liquidity
 Robust IT system is needed for
- Handling of incoming and outgoing e-messages
- Matching and balancing calculation
 EDIGAS messages exchanged by Fluxys dispatching: ± 11 000
(daily)
9

10. HUB INDICATORS (1)
 Liquidity:
- increases when number of customers, volumes traded, number
of trades and price transparency all increase
- A market is said to be liquid when trades of normal size can at
any time reliably be transacted at prices that will approximate
those being reported at that time as being market prices
 Churn factor (re-trading ratio): is the ratio between the traded
volumes and the physical throughput. It points to the number
of times gas volumes change hand within the hub.
OUT
IN
1
N
10

11. HUB INDICATORS (2)
 Level of concentration: the Herfindahl-Hirschmann Index
(HHI) is a measure of the concentration factor in a particular
market.
The HHI is calculated as the sum of the squared market
shares and has a maximum of 10,000, where higher values
indicate a greater level of market concentration, i.e. the market
is divided amongst fewer market participants
 Depth: significant volumes can be traded without resulting in
excessive price moves
11

12. BELGIAN TRADING LANDSCAPE
12

13. 13
SWITZERLAND
ITALY
EASTERN
COUNTRIES
SPAIN SWITZERLAND
ITALY
Gascade
GERMANY
Open Grid Europe
SOTEG
GRTgaz
FRANCE
UNITED
KINGDOM
National
Grid
NORWEGIAN
GAS FIELDS
Zebra
NETHERLANDS
GTS
OVERSEAS
LNG sources Zeebrugge Beach
Zeebrugge Trading point
NBP
PEGs
TTF
GASPOOL
NCG
PSV VTP
BELGIUM: A UNIQUE LOCATION TO REACH MAJOR
MARKETS ÀND THEIR TRADING PLACES
AOP

14. 14
FROM ZEEBRUGGE AREA ONLY (1999)…
ZEEPIPE
TERMINAL (ZPT)
INTERCONNECTOR
ZEEBRUGGE
TERMINAL (IZT) &
ZEEBRUGGE HUB
LNG
TERMINAL
Interconnector
IUK
Zeepipe
Borders IZT, LNG, ZPT:
Total annual delivery capacity of around 50 bcm

15. ZEEBRUGGE – A BRIEF STORY OF TIME (1)
 October 1998: IUK starts commercial operations, linking the
UK gas market to the Continent for the first time. Flange
trading develops in Belgium at several IPs, but most market
players wish to exchange gas in a more structured way on a
unique trading point
 Zeebrugge Hub is officially launched in November 1999 by
Huberator after intensive stakeholder consultation
 The 6 “founding fathers” were a perfect mix of
- UK/US producers
- Continental vertically-integrated players
- Trader (spread trading)
15

16. ZEEBRUGGE – A BRIEF STORY OF TIME (2)
 Huberator and the founding fathers jointly wrote, under the
umbrella of a Focus Group, a Hub Services Agreement
(HSA1999) and its Operating Procedures (OP)
 In December 2001, a new HSA is drawn out in order to
increase the firmness level (IUK switch from forward to reverse
mode brings along many curtailments, leading to hub
reductions), and to that effect services are added to the initial
offer:
- automatic Back-Up/Off-Take for a period of 5 hours (Huberator
temporarily substitutes for the hub customer impacted by the
curtailment)
- Nominated Back-Up/Off-Take after 5 hours (by the hub customer)
- Rounding (to cover for small differences between counterparties)
16

17. ZEEBRUGGE – A BRIEF STORY OF TIME (3)
 In October 2004, HSA 2005 is launched in order to foster
liquidity and further increase firmness (Nominated Back-Up/Off-
Take services didn’t prove satisfactory, resulting in hub
reductions):
- Additional Back-Up/Off-Take for a unlimited period of time after 5
hours of automatic Back-Up/Off-Take
- Creation of an Exchange Platform in cooperation with APX
(anonymous screen-based trading)
 In October 2012 finally, launch of the HSA2012 in order to
integrate the newly created notional services at the Zeebrugge
Trading Point, a new notional hub where Fluxys Belgium’s
shippers can perform balancing operations
17

18. ZEEBRUGGE – CONCLUSION
 When developing a hub, it is paramount not only to be a first
mover (becoming the reference for a given area) but also to
stay ahead of the game by listening to (and evolving in
parallel with) the market needs
 Listening to your customers is essential!
 A well functioning market place, with a great track record of
meeting its customers requirements, will not lead a regulatory
or national authority to completely revamp it
 The success story of the Zeebrugge Hub has caused the
Belgian regulator CREG to further carve the Belgian trading
landscape (2012) based on the existing building blocks
18

19. 19
… TO WHOLE OF BELGIUM (October 2012)
Main principles
Zeebrugge Beach (Physical Trading
Services) is an entry point to the system
and stays connected to IZT, ZPT and LNG
through ZeePlatform services
Zeebrugge Trading Point (Notional
Trading Services) is automatically
accessible through bookings in the entry/exit
zone
Transmission inside Belgium + border to border:
annual capacity of around 120 bcm

20. Transmission Services
Consolidation of net trading position
in Grid User Balancing Position
ICE ZTP
Exchange
Platform
OTC
Market
Registration & facilitation of
OTC/exchange trading
Net
trading
position
Commodity Market
Physical & Notional Trading Products
Single-side
nomination
Notional Trading Services & Zeebrugge
Beach Physical Trading Services
ZTP, ENHANCED WHOLESALE COMMODITY MARKET
ZTP - the Belgian Gas Market
combining liquidity of existing
Zeebrugge Beach with new notional
trading services
20
ICE
Belgium

21. A NEW BALANCING REGIME
1
2
3
Thresholds to limit the aggregated market
imbalances, sized to domestic market needs
No Fluxys Belgium action intra-day and no
impact on market parties as long as market
imbalance is within market threshold
Residual action initiated by Fluxys Belgium
on the exchange when market position goes
beyond market threshold, with cash
compensation for causers
Residual end-of day imbalance settled in
cash
Daily Market Based Balancing
Time
Market threshold
2
3
Fluxys reaction zone
ExcessShortfall
Time
1
12 18 24 6
Da
y
6
Day+1
Market Balancing Position
Grid User Balancing Position
4
4
Comprehensive hourly information provision to the market
In line with EU Balancing Framework Guidelines
21

22. WHAT’S NEXT (1)?
 PEGAS (Pan-European Gas Cooperation) is a trading
platform (set up at the end of May 2013 as a cooperative
venture between the German company European Energy
Exchange (EEX) and the French company Powernext)
PEGAS offers its 140 members both outright products and
spreads
Implementation plan in Belgium
- July 2014: Day-Ahead and Forward Month ZTP
- Autumn 2014: Zeebrugge Beach products (TBD)
22

23. WHAT’S NEXT (2)?
 ZIGMA (Zeebrugge beach Interconnector
Gas Market Area): cross-border entry-exit
zone bringing together the Interconnector
Pipeline, Zeebrugge area and Zeebrugge
Beach.
 Zeebrugge Beach becomes the virtual
trading point within the cross-border
EE zone, which:
- Provides gas sourcing possibilities from Norway (Zeepipe pipeline)
- The UK Continental Shelf (SEAL pipeline) and the ZBG LNG terminal;
- Connects the GB, Dutch and Belgian gas trading places (NBP, TTF, ZTP)
- Links into the GB, Dutch and Belgian downstream markets.
(Consultation on-going - Launch date November 2015)
23

24. BELGIAN TRADING LANDSCAPE – MORAL OF THE STORY
 Heraclitus of Ephesus:
“The Only Thing That Is Constant Is Change”
24

25. OPERATIONAL REVIEW
25

26. 26
HUB MEMBERS (84)
 Alpiq Suisse
 Antargaz
 AXPO Trading AG
 AXPO Trading UK
 BASF
 Barclays Bank PLC
 Belgian Eco Energy
 BG International Ltd.
 BNP Paribas
 BP Gas Marketing Ltd.
 British Gas Trading Ltd. (Centrica)
 Cargill International
 Citigroup Global Markets Limited
 ConocoPhillips (U.K.) Limited
 Danske Commodities
 Delta Energy N.V.
 Deutsche Bank AG - London Branch
 DONG Energy A/S
 DufEnergy Trading SA
 EconGas GmbH
 EDF Luminus
 EDF SA
 EDF Trading Limited
 Electrabel
 EnBW Trading GmbH
 Eneco Energy Trade B.V.
 Enel Trade S.p.A.
 Energy Logistics and Services GmbH
 Eni S.p.A.
 Enovos Luxembourg S.A.
 ENOI S.p.A.
 E.ON Global Commodities
 ENERGYA VM
 European Energy Pooling
 ExxonMobil Gas Marketing Europe Limited
 Fluxys S.A.
 Freepoint Commodities Europe LLP
 Gas Natural Europe
 Gas Natural Aprovisionamientos SDG
 GasTerra BV
 Gazprom Export
 Gazprom Marketing & Trading Limited
 GDF SUEZ
 GDF SUEZ Trading
 GDF SUEZ Trading EM
 GETEC Energie
 Glencore Energy UK Ltd.
 Goldgas
 GreenEx s.r.o.
 Gunvor International B.V.
 Iberdrola
 J. Aron & Company
 JPMorgan Securities Ltd
 Koch Supply and Trading Sarl
 Lampiris SA/NV
 LDH Energy Merchant Europe Sarl
 Macquarie Bank Limited
 Mercuria Energy Trading SA
 Merrill Lynch Commodities (Europe) Limited
 Morgan Stanley Capital Group Inc
 Natgas
 Noble Clean Fuels Ltd
 Novatek Gas & Power GmbH
 Vattenfall Energy Trading Netherlands N.V.
 Petrochina International (London) Co
 Petroineos Manufacturing France
 Petronas Energy Trading Limited
 POWEO Direct Energie
 Progress Energy Services
 RWE Supply & Trading GmbH (Essen Desk)
 RWE Supply & Trading GmbH (UK Desk)
 ScottishPower Energy Management Limited
 SEGE
 Shell Energy Europe Limited
 Société Générale
 Spigas S.r.l.
 Statkraft Markets GmbH
 Statoil ASA
 SVS Securities PLC
 Total Gas & Power Limited
 Vattenfall Energy Trading GmbH
 Vitol S.A.
 VNG – Verbundnetz Gas Aktiengesellschaft
 WINGAS GmbH & Co. KG

27. SPREAD OF NOMINATIONS 2013
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0%
2%
4%
6%
8%
10%
12%
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73
Percentage per Member Cumulative Percentage
22 Hub Customers
80% of the traded quantities
ShareperMember
Cumulativeshare
HHI Concentration factor = Σ Sharei
2
YTD 2013 = 437
<< 10 000  no dominant player
Ranking in % of trade nominations
27

28. 28
0
10
20
30
40
50
60
70
80
90
0,00
500,00
1 000,00
1 500,00
2 000,00
2 500,00
3 000,00
3 500,00
4 000,00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Daily Average Physical Throughput Daily Average Net Traded HHI Hub Customers
GWh/day
STRONG LIQUIDITY GROWTH
EE2012
March 2013
Change in IUK Ops Rules combined with
strong LNG deliveries and ZeePlatform
New HSA
New HSA

29. 29
GWh/day
LIQUIDITY ON THE ZTP (Launched October 2012)
0,00
0,50
1,00
1,50
2,00
2,50
3,00
0
50
100
150
200
250
300
350
Daily Average Physical Throughput Daily Average Net Traded
Churn (right-hand axis)
223% increase

30. KEY FIGURES
 Traded quantities in 2013: 827,7 TWh (73 BCM)
 BE consumption amounting to 183,2 TWh (17 BCM)
 Churn rate 4.5 (even 6+ when considering HCG only)
 Highest traded quantities
- Zeebrugge Beach
> Daily: 3021 GWh (267 Mio m³(n)) on 8th February 2012
> Monthly: 80.2 TWh (7 BCM) in March 2013
- ZTP: 382 GWh (daily) and 9.5 TWh (monthly)
 Active players:
- Zeebrugge Beach: 53 (or 63% of the Hub Customers)
- ZTP: 26
30

31. WHAT ABOUT THE COST OF TRADING?
 Industrial customers are incentivized to source their gas on the
ZTP:
31

32. -200
-100
0
100
200
25/12/2008 1/01/2009 8/01/2009 15/01/2009 22/01/2009 29/01/2009 5/02/2009
GWh
32
-200
-100
0
100
200
25/12/2008 1/01/2009 8/01/2009 15/01/2009 22/01/2009 29/01/2009 5/02/2009
GWh
-200
-100
0
100
200
25/12/2008 1/01/2009 8/01/2009 15/01/2009 22/01/2009 29/01/2009 5/02/2009
GWh
0
100
200
300
400
25/12/2008 1/01/2009 8/01/2009 15/01/2009 22/01/2009 29/01/2009 5/02/2009
GWh
ZEEBRUGGE HUB & UKRAINE/RUSSIA DISPUTE IN 2009
OR HOW A HUB CAN PROVE A RELIABLE SoS TOOL
HUB
The Netherlands France
GermanyZeebrugge area In combination with
interruptible transit offer

33. PRICE INDICATORS - EUROPE
33
Strong correlation between EU market places
EUR/MWh

34. CONCLUSION
34

35. CONCLUSION
 Huberator has a proven track record of successfully developing
trading hubs (both physical and notional), in close cooperation
with its customers and industry associations (e.g. EFET)
 A hub operator has to respond quickly to market changes
 Industrial customers show a growing interest in sourcing their
gas directly at a trading point
 A well-functioning hub combined with the necessary gas
infrastructure increases SoS
 With our mother company Fluxys, and in cooperation with
industry associations, we can help you put in place a
successful hub in Spain
 Any further question? Laurent Remy +32 2 282 7450
laurent.remy@fluxys.com
35

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