Issue Number: 106   March 2014

The Boom of Netherland's Gas Hub

The TTF (Title Transfer Facility), operated by the Gasunie Transport Services, is the Netherland's virtual trading point for gas. The TTF was set up in November 2002 purely for physical players in the gas market. But this is no longer a requirement and it now allows financial players to trade on the TTF without gas actually physically changing hands. Like other gas trading hubs, the price of gas is not directly connected to oil-based products but based on supply and demand. There was a large growth in trade when the TTF was first established but after a while this growth stagnated for several years until a second stage of dramatic growth over the last few years [1]. This article will briefly explore the growth in gas trade and then look at the central reasons for the developments in gas trading in the Netherlands.

The below graph illustrates the development of the TTF. It shows the volume traded at the TTF (grey and yellow lines) and the development of the net volumes (brown columns) as well as the number of active players involved with the trade (blue line)[2]. The net volume refers to the sum of the hourly positions per TTF shipper as registered by GTS. The net volume shows the physical gas flow through TTF which was 58.4 TWh/month at its peak in January 2013, which reflects a cold January in Holland, and in September 2013 net volume was 24.5 TWh/month which indicates a warm September when not much gas was used [3]. From January 2009, there is a large growth in gas traded, gas consumed and the number of traders.

Figure 1: Developments on the TTF

The weakening of the NPB's dominance

Interestingly, some commentators have suggested there is a link between the decline of trade on the UK's NBP (National Balancing Point) and the increase of activity on the TTF [4]. There are suggestions that the TTF's growth in liquidity has meant that it now offers competition to the famed liquidity of the NBP. Looking at the second quarter of 2013, the NBP hub traded 6,600 TWh whilst the TTF hub traded 1,218 TWh. Relative to the same period of 2012, this represents a 27% increase in traded volumes on the TTF whereas this is an 11% decrease on the NBP [5]. These are signs that the NBP's monopoly over the gas hub market in Europe is beginning to weaken, as players are attracted to newer continental hubs such as the TTF.

Reasons for a booming gas hub

It is important to point out that the decline of the NBP is likely to be a consequence of, and not the reason for, the rise of trade on the TTF. This is an important distinction and it should not be missed. So what are the reasons for the boom in trade on the TTF?

One significant reason relates to the change in operating arrangements and contracts made in July 2009. The alteration to the TSO allowed for socialised quality conversion at the TTF which meant that traders could then supply to the system or take from it either High Calorific or Low Calorific gas without needing to book quality conversion capacity. Traders were therefore trading energy, not a type or quality of gas. Soon, shippers realized that the TTF offered a strong and reliable method to trade gas in the Netherlands for both local and international supply. In 2010, there was a large increase in traded volumes which were not just short-term trades but futures as well. This reflects the growing confidence of the traders in the TTF for hedging as well as balancing [6]. The graph in figure 1 reveals the successes of the change in the TSO: there was a large growth in traded volumes from July 2009, as well as a rise in the number of players.

Another source of the growth in trade on the TTF is related to the new balancing regime which was implemented in April 2011. This involved a 'real time' balancing regime, called 'Market Based Balancing'. Available on the GTS Gasport website, the System Balance Signal (SBS) is modelled on the hourly electricity regime [7]. It aims to get market participants to offer flexibility on a 'stand-by' basis. Participants are then rewarded, using a 'neutral' gas price based on APX Spot trades. The system of 'causers and helpers' differs from the old 'stick' model of penalties in arrears for being out of balance, which is the current practice in many other countries, such as the UK [8].

Figure 2: screenshot of the SBS on the 24/02/2014

GTS Gasport provides a graph which contains a short history of the SBS and the prediction for the coming hour (the prognosis value). The graph also shows the sum total of the helpers, causers and buffer zones. The above figure shows a screenshot of a System Balance Signal of the last 31 days (as of February 24)[9]. The benefit to a system like this is that it provides important information to market participants and increases confidence in the system. Since its operation, the TSO has never had to take emergency measures to intervene in the market. Confidence is at an all-time high in the TTF and is continually attracting more financial players.

A third reason for the boom in trade is that GasTerra [10] has been eager to monetize its assets and has been selling lots of gas. GasTerra now increasingly delivers and prices gas at the TTF hub, whereas before they used to sell gas on a long-term contract (which was connected to the price of oil-products). Its new strategy is proving far more popular and efficient compared to the alternative of entering into physical deals at border points which involves more time in negotiating the contracts [11].

Another factor is related to the increased price convergence between the euro zone's Dutch, Belgian, German and French markets, which has meant that the TTF attracts hedging and risk management from traders outside of the Netherlands [12]. Another reason is due to the impact of the recession and falling gas demand and spot gas prices has led to European gas buyers to stop buying from Russia and Norway (where gas price is indexed to oil) and bought cheaper spot market gas on the TTF and other hubs. This has subsequently led to some renegotiation of the long-term contracts which again encourages hub trading.


It is the Dutch government's aim for Holland to be the 'Gas Roundabout' of North-west Europe [13]. The government believes that the prime location of the Netherlands as the 'centre of Europe' will ensure its place as the leader of gas trading. Meanwhile, the NBP's grip on the European gas markets is slowly but surely weakening as traders are beginning to realize the benefits to trading on gas hubs such as the TTF. Perhaps we are witnessing the beginnings of a shift in the place of gas hubs. If trade continues to decrease on the NBP, and increase on the TTF, there might come a point when the TTF could become the largest gas hub in Europe. Watch this space.

Researched and written by MJMEnergy Analyst, Nico Cottrell,

[1] See p. 7

[2] (Accessed 27/02/14).

[3] Data is from excel database provided in the website above.







[10] A Dutch company that is owned by Shell (25%), Esso (25%), EBN (40%) and the state of the Netherlands (10%).




March 2014 MZINE