Gas Pricing
SPM 9541
December 2010
Aad Correljé
Programme
Visions on gas prices
Pricing and economic theory
Gasmarkets
Discussion: market prices?
Pricing systems
Contracts
June 29, 2011
2
Price , Supply and Demand
Price (p)
June 29, 2011
A. Correlje
3
Quantity (q1)
Demand less elastic??
Price (p)
June 29, 2011
A. Correlje
4
Quantity (q1)
Demand less elastic??
Price (p)
June 29, 2011
A. Correlje
5
Quantity (q1)
Supply less elastic ??
Price (p)
June 29, 2011
6
Quantity (q1)
Supply less elastic ??
Price (p)
June 29, 2011
7
Quantity (q1)
Oversupply?
Price (p)
Supply new
June 29, 2011
A. Correlje
8
Afzet (q)
Individual supply curves:
what’s behind????
80
70
60
50
40
30
20
10
0
0
June 29, 2011
A. Correlje
500
1000
1500
2000
2500
9
What’s behind supply
•
•
•
•
•
Supply curve: volumes offered at specific price
Impact of fixed, variable and marginal cost?
In/decreasing additional revenues
Strategy and marktstructure
Market mechanism
June 29, 2011
10
Aggregated supply curve (theory)
80
70
Price (€/MWh)
60
50
40
30
20
10
0
0
June 29, 2011
A. Correlje
1000
2000
3000
Cumulative volume (MW)
4000
5000
11
Gas demand per user segment
12000
10000
8000
6000
4000
2000
0
2003 juni
June 29, 2011
2003 december
Levering aan aardgas handelaren
2004 juni
Invoer
2004 december
Uitvoer
2005 juni
Via gasdistributiebedrijven
2005 december
2006 juni*
Aan elektriciteitsproductiebedrijven
2006 december*
2007 juni*
12
Overige directe leveringen
Temperature and natural gas
consumption
June 29, 2011
Gasunie
13
Supply and demand
•
•
•
•
In-elastic demand (per time slot)
In-elastic supply
Lead times new capacity
Continuous Balancing
• Volatility?
• Market power?
• Investments?
June 29, 2011
14
Which Economic Perspectives will
determine the gas price?
• Structure Conduct Performance
─ Degree of Concentration > Competition > Efficiency:
 Unbundling, free entry plus regulation of monopoly
elements
• Transaction Costs and Institutions
─ Transaction > Risk > Coordination > Efficiency:
 Vertical integration and contracting structures, ex post/ex
ante regulation
June 29, 2011
15
Hybrid gas pricing
• Production: Long term term Take or Pay, Destination
clause, Net Back contracts
• Transmission: Cost plus
• Storage: Cost plus or….
• Distribution: Cost plus or….
• Retail: Oil parity pricing, market segmentation…
• En Title Transfer Facility
June 29, 2011
16
Market places NL
• GOS: bilateral, long term (1 y.), specific oil parity
based contract
• TTF: bilateral, short term (1 m.), standard contract,
gas-to-gas price
• TTF: APX, short term (1 d.), standard contract, gasto-gas price
• TTF: Endex, Long term future (1 j.), standard
contract, gas-to-gas prijzen
June 29, 2011
17