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Poland’s PGNiG to sell natural gas on bourse at hub prices

08 Oct 2013 11:05:40 | esgm

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Polish natural gas incumbent PGNiG will, with immediate effect, begin offering gas on the country’s exchange based on market fundamentals as seen in other neighbouring hubs, it said late on Monday.

The dramatic switch in strategy is likely to have a positive impact on liberalising the Polish gas market and making trade at a wholesale level more competitive.

The change in pricing policy, as PGNiG put it, will cover the Day-ahead market as well as the curve contracts offered by the POLPX bourse.

PGNiG said the decision to change its pricing strategy was in direct response to the country’s newly introduced gas obligation, which forces suppliers to initially sell 30% of the previous year’s volume through the bourse. This figure will increase to 55% in the coming year. The obligation took effect on 11 September.

No volatility

Since the gas bourse launched in January there has been almost no volatility in the price of gas offered at the exchange. The key exception was at the end of March, during the cold snap that gripped much of Europe.

Given its dominant position, PGNiG is the only real natural seller of gas in Poland, so all offers on the bourse are attributed, by other shippers, to the incumbent.

POLPX data shows that Day-ahead gas has continually been sold at around zloty 116.50/MWh (€27.80/MWh). The month-ahead – which is the main other product at the bourse that receives trader attention – has been dealing at a similar price also, regardless of whether it is for delivery in the summer or winter.

PGNiG said it would now be considering over-the-counter (OTC) and exchange prices at neighbouring hubs when pricing the offers it places on screen.

Germany’s GASPOOL is the key trading zone which is likely to lead pricing in Poland given the network connections and recent import activity.

Tariff deregulation

The incumbent has chosen, until now, to broadly sell on the exchange at the same price as its industrial retail tariff, which has led to the lack of volatility, relative to supply and demand fundamentals.

But on Monday, PGNiG said the new pricing strategy would be a better alternative to buyers of spot gas, especially those still purchasing under a regulated tariff.

With the introduction of the gas obligation, energy regulator URE has said the largest industrial end-users can have their tariffs deregulated.

The is significant for shippers, because at the start of the year there was no distinction between selling to a large industrial end-user or to another wholesaler, as both would be banded together in the same tariff group as annual consumers of more than 25 million cubic metres.

But in the spring URE began to exempt counterparties from these rigid rules to liberalise the market. Shippers have needed to request separate exemption for trading either at the bourse or OTC.

PGNiG, after some delay, only applied for the exchange exemption. But last week URE confirmed to ICIS it had in September received a similar request from the incumbent for the bilateral market and that its bid was being processed.

The URE data also showed that 26 distinct entities are listed as eligible to trade the OTC market, with 19 permitted to deal via the bourse.

To date, there is little actual bilateral trade in Poland as master agreements are still in the process of being drawn up and signed. Tom Marzec-Manser

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