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NCG’s natural gas conversion fee to drop to €0.60/MWh from 1 April

15 Feb 2013 16:47:47 | esgm

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Germany's NCG natural gas hub will lower its fee for the conversion between low-calorific and high-calorific gas (L-gas and H-gas respectively) to about one-third of the equivalent GASPOOL charge from 1 April, the hub operator announced on Friday.

While the NCG fee will drop to €0.60/MWh from this date, down from €0.70/MWh, the GASPOOL charge will remain at €1.76/MWh, according to the hubs.

NCG's reduced fees will mean that if the NCG L-gas premium exceeds the €0.60/MWh mark at times of high demand, then market participants will start buying H-gas instead and using the conversion service. Traders polled by ICIS welcome the reduction but expect the new NCG fee to have a limited effect on trading.

"The L-gas premium has maybe exceeded €0.60/MWh in two or three trading sessions this year," one trader said. "If the conversion fee dropped to €0.30-0.40/MWh, it would become more interesting. In that case, people would buy at the NCG rather than at the TTF, and liquidity would improve."

Both the L-gas NCG and GASPOOL markets are closely linked to the Dutch TTF, where German traders can also procure L-gas volumes. In the Netherlands, there is no conversion fee and the costs for converting between gas qualities is covered by transport charges. Many German traders therefore use the option of buying at the TTF and booking transport capacity into the NCG or GASPOOL L-gas zone.

After widening to €0.50-0.60/MWh during the first liquid trading sessions this year (see ESGM 15 January 2013), the NCG Day-ahead L-gas premium over the H-gas equivalent has recently dropped to around €0.30-0.40/MWh, traders said.

At the less liquid GASPOOL hub, it remains extremely difficult to procure L-gas volumes, and there are usually no offers for GASPOOL L-gas products on brokers' screens, with the majority of deals done bilaterally.

According to a ruling by the German regulator, the GASPOOL hub will have to lower its conversion fee by at least €0.44/MWh by 30 September 2013. The current €1.76/MWh charge will have to drop to €1.32/MWh or less from this date. For each hub, the German regulator Federal Network Agency (BNetzA) has set a maximum yearly fee from 2012 until October 2016, at which point the conversion fee will drop to zero (see ESGM 29 March 2012).

The new NCG fee of €0.60/MWh will not have to be reduced until 30 September 2015, at which point the maximum level for the hub will drop to €0.45/MWh.

Both NCG and GASPOOL on Friday also announced that their balancing energy levy charges will drop from 1 April. Again, the NCG fee - which is to drop to €0.20/MWh from €0.60/MWh - will remain significantly below the GASPOOL charge. NCG said it was able to reduce the amount charged after having optimised its balancing energy procurement. GASPOOL's balancing energy levy will drop to €0.80/MWh, down from €1.20/MWh. Johanna Blackader

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