- Gas producers will no longer be required to give with priority to providers the quantities needed to cover the demand on the regulated market
- Gas suppliers will be forced to trade on centralized markets up to 40% of their total annual portfolio
- The network code would enter into force from 1 November 2016
- Amending legislation is required to permit the virtual trading points to operate
Wednesday, August 31, energynomics.ro hosted another informal meeting dedicated to experts and decision makers from the energy industry – Energy Breakfast Club: Gas market – towards a functional market model. The dialogue was opened by Aristotel Jude, State Secretary in the Ministry of Energy, in charge with Oil&Gas, with the observation that Romania has a market model for natural gas, and this is the sum of all legal and regulatory stipulations. “The question is whether this model is workable and feasible, from an European perspective and in consequence with European regulations”, Aristotel Jude began.
He stressed that sustainable solutions to the numerous problems in the gas sector may appear merely on economic grounds, in an open and stimulating business climate. Aristotel Jude presented the guidelines of the future legal framework for O&G sector, meant to stimulate the market to function on three basic principles: transparency, non-discrimination and competition.
Transfer of ownership will be made at VTP level
Natural gas transportation activity is one of the key prerequisites for the proper functioning of the market, and a major problem in this area is the virtual trading point (VTP) and how the reservation of transmission capacity is made, started Jude. “It’s very important to have a fair division of how to reserve capacity; having capacity reservation at entrace – which is giving the network user the right to carry natural gas to VTP, and having capacity reservation for exit – which is giving the network user the right to extract natural gas from VTP. This is a requirement derive from European regulations,” Jude said.
PVT will be a notional point where the transfer of ownership is made, linked with trading platforms, and this requires a change in primary legislation. “Natural gas is a commodity, regulated by the Civil Code, and, as a commodity, ownership of natural gas is transferred with weighing / measuring. Up to 2015, allocations and closures were made at the supplier level; with the new Code the allocations and closures will be made at the network users’ level,” Jude said.
“Without clarification in this regard in primary legislation, we can not track property” and we can not move forward towards a functioning market model, said the Secretary of State. “If we get to having an allocation system to lead to a safe management of the commercial balancing, this will finally provide us with the starting point for a sustainable development of the gas market.”
GEO for increasing liquidity on the centralized markets
To enable commercial balancing in national transport system, we need a liquid market. Currently, the market is illiquid and do not provide the necessary support of intra-day transactions.
Therefore, the Ministry of Energy will launch a public consultation to promote GEO in order to stimulate transactions on centralized markets. “One of the changes is to limit the temporal applicability of Article 124, letter e) of Act 123,” Aristotel Jude said.
Article 124, Law 123, includes among the main obligations of the natural gas producer, at letter e)
to make available to suppliers as a matter of priority the natural gas amounts resulted from the production activities, required for covering consumption on the regulated market, in compliance with the ANRE regulations on the observance of the schedule for price liberalization and provision of natural gas for captive customers, the suppliers having obligation to observe the destination of such natural gas amount; the rest of the own production, except for the amount of natural gas realted to the technological consumption defined at Art. 100 item. 35, shall be made available on the competitive market;
This article is the basis of infringement procedures by the European Commission, which can reache, anytime npw, the European Court of Justice. “Our intention is to close this infringement procedure,” Aristotel Jude said.
“This change will represent a huge step forward towards the free formation of a real gas price on the market “, said the representative of the Ministry of Energy. Currently, “article 124 puts on the market natural gas from domestic production at an administrative price, with priority for suppliers, who then resell gas to the domestic consumer under a final regulated price.” So we have two administrative decisions imposing the entry and the exit price on natural gas market. “We’re talking about a significant amount of 4 billion cubic meters per year,” Jude said.
Gas suppliers, brought on centralized markets by force of law
“In the gas market, there are bilateral contracts for 98.5% of Romania’s consumption. On centralized markets it was only traded 1.5%, ie only 1.7 million MW out of a toal consumption of 121 million MW” announced Aristotel Jude. However, there is no market without transactions. Therefore, the Ministry of Energy intends to amend an article so as “to establish the obligation for gas suppliers to purchase needed for domestic, regulated consumers, in a transparent, non-discriminatory and competitive manner.”
According to Aristotel Jude, this decision will not only ensure increased liquidity on centralized markets, but also sustainability and balance in terms of methodology for calculating the final regulated price, because “the regulator will be able to check how these amounts were purchased.”
New services on natural gas storage sector
“We want the storage activity to become also sustainable in economic terms, especially in the context of BRUA project, which will force Romania to compete with other European markets,” said Jude. Currently, the storage activity operates on seasonal cycles of injection and extraction, but has the potential to grow to provide the services required by the operators in the market: multi-cycle storage, technological storage and strategic storage.
“We must understand that strategic storage – capacity and volumes – is destined only to crisis situation,” Jude said. Strategic deposits will not anymore ensure, therefore, amounts needed for covering peak demand, which is related to the natural gas commercial market. “Suppliers are those required to make available the quantities of natural gas demanded by the consumers in their own portfolios, […] because they have signed contracts with end-customers.”
