SUBJECT PAGE: Merger of the gas market in Germany

LATEST UPDATES

September 27, 2021

Trading Hub Europe: two German gas hubs will become one

After years of planning, the two German gas hubs are configured to merge in the Trading Hub Europe (THE) on October 1, and many are hoping this will help German liquidity climb to the Dutch TTF.

The merger will create the largest physical gas hub in Europe, with the presence of L and H gas networks in Germany, which means that it is technically a merger of four gas hubs.

September 14, 2021

Nord Stream 2 and the merger of German hubs could leave Ukraine and EEC in the cold

Ukraine and neighboring countries of Central and Eastern Europe are preparing for the triple whammy of peak winter demand, the possible impact of the diversion of Russian flows to Nord Stream 2 and the merger of German hubs, which could to leave them in the cold over the next few months.

CIHI analysis found that the region could face a supply shortfall of 15 to 65 billion cubic meters unless additional volumes are found and more transport capacity is available.

The most affected country is said to be Ukraine, which depends on 10 to 15 billion m3 / year of gas imported from central and eastern Europe since it decided to stop direct Russian imports in 2015.

June 15, 2021

German VIPs of Trading Hub Europe with TTF, ZTP will be delayed

Virtual interconnection points (VIP) between the Belgian ZTP and Dutch H-gas hubs TTF, and planned unified German Trading Hub Europe (THE)
will not be ready on October 1, 2021 when the NCG and GASPOOL merge.

The TTF-THE and Denmark-Germany L-gas VIPs are expected to be operational for the first day of the newly merged market, with the first market auctions scheduled to take place on September 30, 2021 for the Day-ahead contract.

The VIP TTF-THE H-gas and the VIP THE-ZTP are scheduled for April 1, 2022.

April 22, 2021

Trading Hub Europe to take over NCG and GASPOOL operations in June

German markets, NCG and GASPOOL have announced that they have signed a set of contracts providing for the merger of the two markets into Trading Hub Europe (THE).

The contracts mean that NCG and GASPOOL
will merge into a single entity, THE, on June 1, 2021, THE assuming the responsibility of operating and managing the two market areas until their official merger on October 1, 2021.

April 21, 2021

German gas trade switches to NCG ahead of October hub merger

The German trade in natural gas for delivery beyond the October 21 merger date is move towards the NCG, traders choosing to manage their positions in the most liquid market.

Over-the-counter (OTC) liquidity at the GASPOOL hub fell by 18% compared to the last three months of 2020 to 197TWh in the first quarter, with the NCG registering a drop of just under 8% to 410TWh.

In the first quarter, NCG maintained its position as the third most liquid European gas hub, with GASPOOL falling to sixth after being overtaken by the Italian PSV and Austrian VTP markets.

March 31, 2021


GiF Inside Story: Germany to launch a single gas hub in October

The German Federal Network Agency (BNetzA) announced on March 19 the completion of the 2020-2030 gas network development plan (NEP Gas), which focuses on planned LNG plants and the integration of hydrogen and gas. green gases in the network.

BNetzA has decided that no network extension is necessary to facilitate the German hub merger scheduled for October 1, arguing that the transmission capacity to move gas between the two market areas can be secured using ‘market-based instruments.

The costs of using market-based instruments are expected to be € 1.1 million to € 27.6 million for the gas year 2025/2026, which is significantly lower than the cost of expanding the physical network, according to the agency.

March 31, 2021

ANALYST VIEW

German gas supplies

• Germany’s dependence on imports is high with over 95% of its demand for natural gas imported from a diverse supply base.

• The share of Russian gas in German imports hovers around 50%, with an increasing trend in recent years. 2020 saw the supply of Russian gas reach minimum contractual volumes of around 45 billion m3 / year, but representing a high share of the demand for Covid-19. The high degree of exposure to Russia is similar to the oil markets where German imports are around 36% Russian.

• German gas imports could theoretically all be covered by long-term supply contracts. Assuming that the minimum take-or-pay offtake volumes are lower, we believe that between 80% and 90% of German gas imports actually come from supply contracts. More than 20 billion cubic meters of gas supply contract quantities, mainly Dutch and Norwegian, expire in the coming years and could be replaced by more flexible agreements. German import contract maturities have been shortened to 20 years on average, compared to more than 25 years in 2010 (including extensions) and volume flexibilities are expected to increase. We estimate that almost all German import contracts already include hub indexing elements, but some contracts use neighboring gas hubs. Policyholders may consider switching to the new THE hub.

• Supply via pipeline supply remains the likely option to fill the emerging void as none of the three planned German LNG import terminals have received FID so far (the most distant is HEH Stade with a binding phase open season scheduled for the second quarter of 2021).

CONCLUSION: It is possible for new entrants to fill in the gaps left by the expiration of supply contracts. The importance of the price of the THE hub in gas supplies is likely to increase.

2March 5, 2021

BNetzA announces the development plan for the German gas network

German Federal Network Agency (BNetzA) announcement the completion of the 2020-2030 gas network development plan (NEP Gas), with the use of an evolution request relating to LNG plant projects and the integration of hydrogen and green gas in the network.

The decision confirms 175 measures totaling 7.83 billion euros of investments proposed by the transmission system operators (TSOs) extending the network by 1,620 km of gas pipeline and 405 MW of additional compressor capacity.

Among the key announcements was that the BNetzA considered that
no network extension is necessary following the merger of the German hub
, arguing that the transport capacity to move gas between the two market areas can be guaranteed using market-based instruments.

January 22, 2021

Hub merger and summer injection demand could boost German liquidity in 2021

German OTC volumes increased 24% year-on-year in the fourth quarter of 2020, reaching a total of 685 TWh at the two hubs, according to data from CIHI.

Liquidity was enhanced by the fact that trading activity for annual NCG contracts more than doubled.

Liquidity can be expected to continue growing in 2021, benefiting from higher summer injection demand due to significantly more empty storage tanks, the hub merger set for October 1 and the potential completion of the Nord Stream 2 and EUGAL pipelines.

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