Updated: Virtual Zeebrugge beach hub plans scrapped by operators

Plans to create a new natural gas market area in Belgium with the physical Zeebrugge beach hub transformed into a virtual trading point have been scrapped by the system operators involved: Fluxys in Belgium, Britain’s National Grid and the Interconnector pipeline operator IUK.

The Zeebrugge beach Interconnector gas market area (ZIGMA) was proposed in April, but prompted a hesitant response from the majority of shippers active in the zone who were wary of a drop in liquidity amid additional complexity ( see ESGM 15 May 2014) .

Changes to the region are necessary to bring the zone in line with upcoming EU-wide network codes on balancing and capacity allocation mechanisms.

A new proposal by the three operators would maintain hourly balancing on the Interconnector pipeline and revise the offer of bundled capacity products to be made available between the British and Belgian markets.

The contentious two-hub system in Belgium would remain intact.

New model

The latest proposal would offer bundled capacity products at both Interconnector terminals – Bacton and Zeebrugge – allowing shippers active in Britain or Belgium to choose which products they need.

This replaces the previous plan under ZIGMA to eliminate the Interconnector Zeebrugge terminal as a commercial interconnection, leaving the Bacton terminal as the sole gateway between Zeebrugge beach and the NBP markets with bundled entry/exit capacity products offered at the point.

The amended proposal details six bundled capacity products to be offered between the British and Belgian markets:

•NBP exit/Interconnector entry

•NBP entry/Interconnector exit

•Zeebrugge beach exit/Interconnector entry

•Zeebrugge beach entry/Interconnector exit

•ZTP exit/Interconnector entry

•ZTP entry/Interconnector exit

Shippers wanting to transit gas between the NBP and Zeebrugge beach/ZTP hubs would need to purchase two bundled capacity products: one to enter the pipeline and one to leave the pipeline.

New bundled capacity products will still be offered via the PRISMA auction platform.

Due to the fact that Interconnector capacity has already been allocated out to October 2018, an interim period between the enforcement of the capacity allocation mechanism on 1 November 2015 to 30 September 2018 has been outlined in which annual, quarterly, monthly and day-ahead capacities freed up via congestion management procedures will be offered as bundled products to the market.

From 1 October 2018, all capacity will be made available through bundled products.

The Interconnector will also maintain hourly balancing where shipper entry and exit nominations at each terminal must match, instead of switching to a daily regime where users’ balance positions would be able to deviate within a predefined threshold throughout the gas day. No imbalance charge would therefore be necessary under the new proposal.

Reduced complexity

The operators say the new model addresses key shipper concerns aired in the previous ZIGMA consultation regarding additional complexity.

The set-up will also allow future connections to be integrated into the model; some grid users had questioned how the new pipeline connection between LNG terminals in France and Belgium would have fit into the ZIGMA model.

The latest plan has also hinted at new IUK storage products to be offered from October 2018, which would be independently available for shippers to purchase, although the service is yet to be developed.

The proposal would, however, maintain two separate hubs in Belgium, denominated in different currencies: the physical Zeebrugge beach hub which deals in pence/therm and the virtual ZTP in euros/megawatt-hour.

The value and necessity of the two-hub system in Belgium has been questioned by shippers since the inception of the ZTP in October 2012 and the issue was raised again by half of the respondents to the ZIGMA consultation in April this year.

Next steps

Fluxys and IUK will now hold two industry workshops on 23 and 25 September in Brussels and London respectively. The two operators will then develop the necessary contractual changes for the new model ahead of formal consultations in January 2015. Jake Horslen