Shippers optimistic about new Slovenian gas virtual trading point

Slovenia will launch its natural gas virtual trading point (VTP) on 1 October. The move has been universally welcomed by traders despite representing a significant change in mind set, contacts said.

“The change is quite big. After the establishment of an entry-exit model and trading of capacity through auctions, this is another step to achieve a competitive gas market,” said Mojca Spanring, head of regulator Agencija za Energija’s network regulation department.

The development comes as the country launches a balancing platform to comply with the EU network code on balancing.

The balancing platform will have two standardised products for balancing: a day-ahead and a within-day product. Contacts were optimistic about the launch of the balancing platform, which they believed would help the development of the VTP. One gas trader active in Slovenia believed counterparties from neighbouring countries Croatia, Austria and Italy might be drawn to the new VTP to balance their positions while shipping gas between markets.

Trade at the virtual hub is not expected to take off immediately. “The upcoming changes are significant. Therefore, it will take some time for market participants to use the advantages of the new market,” said Spanring.

Mind-set change

Contacts said that companies active only in Slovenia would not have experience of a market-based balancing system and could find implementation of the changes daunting, while those active on hubs such as the Austrian VTP or the Italian PSV would be familiar with the model. One well-placed source described the development as a “big change in mind set” for Slovenian market participants.

Gregor Karlovsek, head of market operations at Slovenian energy company Petrol, told ICIS he was unaware of any market participants who were critical of the new system, which makes it easier to do deals. “We want to be like the power market or foreign gas markets, where it’s very easy,” he said.

“The establishment of the VTP is necessary for the entry-exit model required by regulation 715/2009 to function well,” Spanring said. “[The balancing network code] requires the promotion of short-term wholesale market of gas for balancing.”

The VTP replaces a system under which Slovenian companies had to obtain interconnection rights and then nominate a foreign counterparty to deliver gas at a particular physical point at a national border or city.

The introduction of a VTP could create a suitable environment for brokers to set up Slovenian screens, according to Karlovsek. “The VTP doesn’t guarantee liquidity, but it gives you the option of developing it,” he said.

Own price signals

A traded market in Slovenia means market participants will be able to respond to market signals specific to Slovenia, rather than referencing liquid but distant hubs such as the Dutch TTF or even the Austrian VTP. “It’s like being in the UK and using the Japanese Yen as an index. Slovenia has little to do with the TTF,” Karlovsek said. “Norwegian problems can push the TTF up at a time when southeastern Europe is oversupplied and prices are low.”

There are about 10 balancing groups in Slovenia. The country’s annual gas consumption has been about 756 million cubic metres (mcm) in recent years, according to statistics from the European Commission.

Slovenian transmission system operator (TSO) Plinovodi is holding a workshop on 9 September about the functioning of a virtual trading point, use of the balancing market, and the functioning of balancing groups. amy.booth@icis.com