European gas – competition inquiry identifies problems

Published in February, the European Commission’s interim report of its Energy Sector Inquiry makes intriguing, if rather depressing, reading for proponents of gas market liberalisation across Europe, and indeed for UK gas consumers, whom British energy regulator, Ofgem, believes have already paid £3.5bn too much for their gas as a result of the slow pace of liberalisation in most European gas markets. The report paints a picture of European markets closed to new entrants by five major barriers outlined below.

Read the rest of this article

mWELCOME

Welcome to the March issue of MZINE, a little later than planned. This month we will be looking at competition problems in the EU and how that causes problems not only for Europe but also the UK see MSTORY for our main article. MPRICES  looks at the spot Oil Forward Curve, whilst at MPHASIS  Derek has uncovered the truth about the UK gas storage!! Don't forget to check out our thought of the month at MPATHY.

Our latest list of training courses can be found at MTRAIN. I am still taking bookings for the Emissions Trading one-day seminar on the 22nd March, so you might just squeeze in if you are quick.

Please feel free to contact me about this newsletter and let me have your thoughts, what you like and don't like, I am open to your suggestions.

And if you have enjoyed reading this newsletter and think you know someone who might also enjoy it then feel free to forward it on.

Kind regards.

Paul Cassar
Editor

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mTRAIN

All of our training courses can now earn, participating solicitors, CPD points from the law society. Attendance at any of our events may also contribute to meeting accountancy CPD requirements under the terms of the ICAEW’s CPD policy. Please visit www.icaew.co.uk/cpd for the ICAEW's CPD policy details.

Over the next few months the following one-day events are being held in Oxford, UK and London, UK. 

More information about these courses can be found by clicking on the course title or visiting energytrainingnetwork.com and clicking on public courses. Alternatively you can contact me by email or phone +44 (0) 1235 553917, fax +44 (0) 1235 553917.

Any of our public courses can be held at your location, for your company, or they can be tailor made to your requirements. If you want to find out more contact our Training Manager Nick White nick@mjmenergy.com +44(0) 1235 211161.

OTHER DATES

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mPRICES
Forward Oil Curve

THE FORWARD CURVE

Rising stocks in the Atlantic Basin have pushed the front end of the forward curve into a deeper contango. Product stocks are unseasonally high as the refinery turnaround season approaches, depressing prompt refinery margins. Gasoline stocks are up sharply ahead of the changeover in product specifications and a warm winter has left distillate stocks largely untouched. Longer-term prices are also lower with an easing of supply tensions and OPEC’s decision not to cut output this quarter.

Longer-term prices for Calendar 2007 WTI remain high at $65/bbl, for the market still seems to be taking a bullish view of demand prospects and is concerned about future capacity constraints. Although industry stocks are rising, inventories cannot provide more than a partial substitute for shortfalls in supply capacity. The balance of Calendar 2006 WTI is just under $63/bbl – equivalent to $62/bbl for Brent or over $56/bbl for the new OPEC basket of crudes.

CGES Monthly Oil Report, 16 February 2006  www.cges.co.uk

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mPHASIS!
for the lighter side of life!

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mPATHY
thought of the month

To find a friend one must close one eye. To keep him – two.

Douglas (George) Norman 1868-1952

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mOFFERS
this month's exciting offers!

As a special thank you to all our readers we would like to offer you this free Conversion chart which you can print off and carry with you wherever you go.
Download pdf

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mFEATURE

British National Grid issues first balancing alert as demand trigger reached  

British gas network operator National Grid issued its first ever Gas Balancing Alert (GBA) on Monday, as demand rose over the trigger level of 377 Mm3. 

Demand was forecast at 380 Mm3 for Monday but was actually higher at 385 Mm3 at 08:00 GMT, dropping to 380 Mm3 by 13:00. High demand (30 Mm3 above seasonal normal) coupled with the continued outage of the Rough facility and continental supply problems combined to leave the UK system as much as 10 Mm3 short.

The GBA was first launched on 15th November this winter in order to warn the market when the UK system is short and a demand response may be required. The demand trigger was first set at 477 Mm3 but was reduced to 467 Mm3 from 20th December as assumptions on Interconnector flows were lowered. It was then lowered to 425 Mm3 from 1st March after the Rough storage site incident.

The GBA was triggered on Monday as there was only 1.1 day’s worth of storage left in the country’s four LNG (short range) storage sites. If any of the types of storage (long range, medium range or short range) are forecast to contain only 2 days at maximum withdrawal rate) left in storage above the safety monitor level by the end of a current gas day, the trigger level is reduced by the maximum withdrawal rate for that class of storage. For short range this figure is 49 Mm3, meaning the alert trigger was dropped to 377 Mm3. The storage monitor level for short range storage is zero. There are 7.6 days of medium range storage left at maximum withdrawal, before these sites also breach the storage monitors, according to the latest data from NG on Monday. If this should happen before the end of the winter, the demand trigger would be lowered by a further 28 Mm3 to only 349 Mm3. The alert is only published when needed, on a day-ahead basis and does not automatically entail any action from gas users or NG.

The Interconnector has been flowing at its highest levels ever this winter following expansion, peaking at 47.60 Mm3 on 22nd February. This had dropped last week and was down to 26.66 Mm3 on Friday. Traders said nominations indicated flows just below this level on Monday.

NBP Within-day hit 255.00 p/th on Monday (see NBP comment), the highest price since 3rd March 2005, when it rose to 160.00 p/th. The only previous spike above this was on 16th and 17th December 1997, when System Margin Price buy was just above 497.00 p/th. This happened as a result of Rough being struck by lightening. There has already been considerable demand-side response this winter as a result of high prices. Demand has turned down by as much as 50 Mm3 per day, the majority from gas-fired power plants. The Heren Report understands that the maximum daily response from industry and commerce was around 8 Mm3 and that this demand had largely returned in March. LB

This article was published in Heren's ESGM on Monday 13th March 2006 and is reproduced by kind permission from Heren. If you would like a free two week trial of ESGM please let me know.

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