Updated: Single bourse rule could hit Romania’s gas market liquidity

Romanian gas companies have slammed a proposal to restrict gas trading to a single bourse, raising concerns about the development of market competition, liquidity and the future of investments.

Under the proposals which were debated in the committee for industries and services of the Romanian parliament on Tuesday, companies would have to trade all their volume on a single centralised market, following strict transparency rules. The committee delayed a vote on the proposals to next week.

Traders interviewed by ICIS said the recommendations would raise ‘real barriers’ in the market, and potentially lead to the permanent blocking of upstream investments.

“From a practical perspective, direct bilateral contracts would be no longer possible,” a source active in the region said. “Also, extensive disclosure obligations on sensitive contractual information would be required by law. Such amendments would represent real barriers in the functioning of a free gas market, based on demands and offers, and would block (maybe permanently) investments upstream.”

Traders also noted that, if adopted, the amendment would nip in the bud the nascent liquidity on the Romanian Commodities Exchange (BRM) and cause limitations similar to those seen in Romania’s electricity market.

The parliament’s committee for industry and services did not comment by publication time.

Operation monopoly

The bulk of gas trading in Romania has happened bilaterally in the past years, but there are also two dedicated gas exchanges – one hosted by the Romanian Commodities Exchange (BRM), which is in operation, the other by the energy exchange OPCOM, which launched three gas platforms, including one for over-the-counter (OTC) gas trading.

Since gas tariffs were liberalised in April, liquidity has taken off on BRM.

Liquidity this month soared more than sevenfold on the BRM platform compared to January. BRM exchange data shows that 7.3TWh of gas changed hands in the first 20 days of the month, more than the 3.7TWh traded in all of March. In February, only 600GWh was traded, while in January just 100GWh was dealt through the centralised market.

OPCOM has seen comparatively reduced liquidity, although it has applied to the regulator ANRE for a licence to operate a day-ahead gas market.

Traders now fear the parliament’s proposed amendments would see trading diverted to the state-operated OPCOM in a move similar to 2012 when all bilateral and OTC transactions in the electricity market were diverted to the bourse.

“So far [since its launch in 2013], BRM has organised 1044 auctions amounting to 33TWh, OPCOM had only carried out three auctions,” a source active in the market said.

In a letter to participants seen by ICIS, BRM warned that the proposed amendments could close down operations on its platforms, despite its recent success in helping to build up liquidity.

“We cannot think of any developed countries where the operation of a market is handed to a platform which is directly or indirectly owned by the state,” BRM, said.

OPCOM did not comment by publication time.

In the proposed amendments, members of the committee argued that the introduction of a single licence operator was necessary in order to reflect a recommendation by the European parliament for the introduction of a single market operator in each member state.

However, Romanian gas companies have pointed out that most EU members allow transactions to happen on multiple platforms, quoting the examples of Germany or France where participants can trade volumes on as many as seven platforms.

Obstacles

If adopted, the proposed amendments would mirror a similar decision taken in 2012 when all transactions were centralised on OPCOM. The decision was taken following a scandal involving the sale of volumes under long-term bilateral contracts at prices that undercut the free market (see EDEM, 18 June 2012).

However, a source active in the electricity market said the measure was extremely punitive, noting that it had left very little flexibility for market players to sell volume and hit investments in the sector as private producers with multi-million euro investments were scrambling to sell their production.

“If one or two companies engage in corrupt practices, you crack down on their activities and punish the perpetrators, but not the entire market,” he said. aura.sabadus@icis.com