The year in brief: Austria

20 December 2013 11:21 Source:ICIS
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During the first year after the switch from a physical to a virtual trading point, activity at the Austrian hub recovered. The change has attracted more companies to the traded market and has laid a solid foundations for future growth


The previously physical CEGH hub was transformed into a virtual trading point (VTP) with one entry/exit zone from 1 January 2013, removing the division between transit and domestic gas volumes. As a result, several companies have signalled interest in starting activities at the new virtual trading point. Danish merchant Danske Commodities and Swedish utility Vattenfall both entered in Q1 ‘13 and have since gradually increased their activities on the Austrian market.


New market design

With the exception of the two areas Tyrol and Vorarlberg, the whole country now belongs to the new eastern market zone, with transmission system operator (TSO) Gas Connect Austria (GCA) actubg as the market area manager.

The newly created position includes responsibilities for balancing groups and flow management. Austrian Gas Grid Management (AGGM) will take on the same functions for the two regions Tyrol and Vorarlberg, which do not have a physical connection with the rest of the Austrian grid.

Both areas were integrated into the German NCG market zone from 1 October this year, which means that any German company can supply customers in the two Austrian regions without booking additional transport capacity. Nominations take place at the NCG but volumes that deal under the arrangement are considered to have been delivered in the respective Austrian area.


Traded volume

After a drop in trading activity towards the end of 2012 ahead of the transition to the new virtual trading point, Austrian over-the-counter (OTC) volumes recovered gradually over the course of 2013.

On the prompt, a total of 24.44TWh of Day-ahead trades dealt at the hub between the beginning of January and the end of November according to ICIS data, giving a monthly average of about 2.22TWh – up 51% from the same period a year ago.

Total Austrian OTC trades amounted to 185.45TWh or an average of 16.86TWh per month over the same period, up 50% year on year. At first glance, this is a significant year-on-year growth rate, but just means that trading activity has returned to 2010 and 2011 levels following a dip last year.

Generally, about half of the Austrian prompt and curve trade is still done bilaterally, so broker screens do not fully reflect the activities at the VTP. Many contracts with delivery beyond the two front quarters are still relatively illiquid on broker screens, and it tends to be difficult to find a counterparty for bigger volumes on the far curve.


Price drivers

The Austrian hub mostly continued to follow the German NCG’s price movements over the course of 2013, but was at times also heavily influenced by the supply and demand situation in Italy.

Since the start of bundled Austrian-German Day-ahead transport capacity trading on Europe’s new PRISMA platform in June, entry capacity into Germany at Oberkappel has been the most popular product offered on the platform. Although on average, VTP Day-ahead was a marginal €0.039/MWh cheaper than the NCG equivalent between the beginning of January and the end of November, it now usually stands at a premium over the German contract.

The spread between the two products has been extremely volatile over the past year, offering considerable arbitrage opportunities on many days. During the cold spell in March when prices surged across all European trading points, VTP Day-ahead closed several euros below the NCG contract on several occasions, while during the summer, the NCG contract’s premium repeatedly exceeded €1/MWh.

Policy and regulation

With the transformation into a virtual trading point at the beginning of 2013, the Austrian balancing regime switched from an hourly to a daily system.

Market area manager GCA is now solely responsible for buying and selling balancing gas on the within-day market at the CEGH exchange for all balancing groups. If a balancing group’s daily imbalance is bigger than 24MWh, GCA buys or sells within-day gas at the best available price, defined as +20/-20% of the exchange’s daily reference price.

However, GCA has the right to expand the possible range to achieve a better price should market conditions change. Imbalances smaller than 24MWh will be added to the following day’s calculation. Johanna Blackader

By Johanna Blackader