European Gas Hub Report Methodology

Market	Assessment name	Frequency	Units
NBP	Tradability Index	Quarterly	Score out of 20
Zeebrugge	Tradability Index	Quarterly	Score out of 20
TTF	Tradability Index	Quarterly	Score out of 20
NCG	Tradability Index	Quarterly	Score out of 20
Gaspool	Tradability Index	Quarterly	Score out of 20
PEG Nord	Tradability Index	Quarterly	Score out of 20
CEGH	Tradability Index	Quarterly	Score out of 20
PVC	Tradability Index	Quarterly	Score out of 20

 

METHODOLOGY LAST UPDATED:

17 October 2012

To comment on any aspect of this methodology, or to propose changes, please contact Louise Boddy, Head of Gas, Power, Carbon & Coal, ICIS , on +44 207 911 1948.

The Tradability Index was first published in October 2007. Historical data are available.

ICIS continually develops, reviews and revises its methodologies in consultation with industry participants. A minimum of 30 days’ notice will be provided for any change in methodology.

GENERAL METHODOLOGY

ICIS publishes market data based on information continually gathered from market participants about: spot transactions; spot bid and offer levels; contract price negotiations; prices of related commodities; and relevant freight costs.

ICIS includes in its data-generation process only information gathered up to the published market close time for each commodity and assessed period. ICIS does not make retrospective adjustments or changes to price quotations based on information subsequently received.

ICIS regards all arm’s-length transactions that meet its specification criteria as carrying equal weight.

ICIS endeavours to crosscheck all the transaction information it gathers. ICIS will not use information for assessment purposes where such checks call into doubt the accuracy of the original information, or where a transaction appears to have occurred under circumstances that render it non-repeatable or otherwise markedly unusual.

CHURN RATIO

A churn ratio is a measure of liquidity showing the number of times every unit of gas has traded ahead of delivery.

An Over-the-counter churn ratio is published for each of the 8 major trading hubs in Europe:

• NBP
• TTF
• Zeebrugge
• NCG
• GASPOOL
• PEGs
• PSV
• CEGH

The ratios are updated in the Full European Gas Hub Report released in October, as well as the three quarterly updates throughout the year.

This figure is calculated using all OTC deals discovered, verified and published by ICIS Heren during the course of its daily price reporting. The volume of deals per month represents deals done for delivery in the month in question, not the volume transacted during the month.

These volumes are then divided by the physical hub throughput volumes for that month as published by the country’s hub operator.

The ICIS Heren deal data series for the churn ratio starts from January 2008. It includes all deals with any delivery days during the report month done from 1st January 2008 onwards.

For example, trades data used for the January 2011 churn ratio will include the January ’11 volume from Winter ’10 deals done as far back as 1st January 2008. It will also include Within-day deals done during the month of January 2011.

No exchange platform data is included and all volumes are purely Over-the-counter. For the NBP, the inclusion of exchange data would push the churn significantly higher than all other hubs.

Most bilateral deals are not captured in the trades data and no structured deals are captured. For hubs in Southern and Eastern Europe, this would push the figure above the ICIS Heren OTC Churn.

TRADABILITY INDEX

ICIS bases its Tradability Index assessments on information gathered during its daily price-generation process for European Spot Gas Markets.

It represents the width of bid-offer spreads available on traded gas hubs during every UK working day of the quarter prior to publication.

For example, the Tradability Index published in the Q1 issue, which is typically released mid-April, represents the width of the bid-offer spread on every UK working day during the immediately preceding January, February and April.

For each hub, ICIS assesses whether there was a bid-offer spread available for a range of 10 contracts at less than €0.50/MWh and then at less than €0.30/MWh on every day during the quarter in question, to all interested counterparties. The spread may have been available at any point during the trading day, not just at the close of trade, when ICIS assesses the price.

The traded gas contracts used in the Tradability Index comprise:

• Within-day
• Day-ahead
• Balance-of-month
• Month-ahead
• Next quarter
• Next season
• Two seasons ahead
• One year ahead
• Two years ahead
• Three years ahead

If a bid-offer spread of less than €0.30/MWh is assessed to have been available every working day during the quarter for a particular contract, it will score 2 in the index.

If the contract is assessed to have been available at a spread of less than €0.50/MWh every day, but not less than €0.30/MWh every day, it will score 1 in the index.

If the contract is assessed to have not been available at a spread of less than €0.50/MWh every day, it will score 0 in the index.

The maximum score for any hub is 20 and the minimum is zero.

PUBLICATION SCHEDULE

The Tradability Index is assessed every quarter, and published in the European Gas Hub Report. A full-length report is published every October, giving a detailed description of the state of trade and liquidity on all major European hubs, as well as developments at the less liquid and potential future hubs.

Following the full report, three quarterly updates are provided for Q4 (published mid-January), Q1 (published mid-April) and Q2 (published mid-July).