Most of the French gas consumption is covered by imports. The balance of gas flows of the French gas system between the upstream and downstream is shown in the diagram below.
During the third quarter of 2011, imports accounted for 131 TWh, down 9% from 143 TWh during the previous quarter. The imported volumes fell by 11% compared to the third quarter of 2010.
Supply structure remains stable and well diversified. The main suppliers remain Norway (37%), Netherlands (17%), Russia (15%) and Algeria (14%). Natural gas from other countries, including Nigeria, Egypt and Qatar is imported in the form of LNG.
Net imports accounted for almost 100 TWh (more than the natural gas consumption in France), down 22% from 128 TWh during the second quarter of 2011.
Since the fall of gas prices in 2009, many importing countries have asked their suppliers to introduce a variable of spot market indexation clauses into their long-term contracts. Several exporters have agreed to include this variable, but to some extent. The contracts indexation is still mainly based on oil prices and its derivatives.
French supplies remain dominated by long-term contracts concluded between the major European companies and their suppliers, like Gazprom (Russia), Sonatrach (Algeria), Statoil (Norway), or Terra Gas (Netherlands).
Supplies and outlets in the French gas market in Q3 2011
Sources: GRTgaz, TIGF.
The ‘Others’ item corresponds to the gas consumed by the TSO and DNO to ensure network operation (own consumption, metering errors, losses…)
B) Evolution of gas consumption in France
French consumption fell by 18% in the third quarter of 2011, recording 58 TWh as against 71 TWh in the previous quarter. It increased by 4% from 56 TWh over the third quarter of 2010.
C) Day-ahead prices in France and European comparison22
The Day-ahead prices at the French market followed the volatility of the principal European hubs during the third quarter of 2011. In September, Day-ahead contracts at the PEG Nord dropped from 25.7 €/MWh at the beginning of the month to 17.7 €/MWh at the end. The average price during the third quarter was 22.4 €/MWh, down 2% from 22.9 €/MWh over the second quarter. It increased by 19% from 18.2 €/MWh during the third quarter of 2010.
Average Day-ahead differential between PEG Nord and PEG Sud was 0.08 €/MWh during the third quarter of 2011, compared to 0.04 €/MWh during the last quarter. The activity at the PEG Sud-Ouest was particularly lower compared to the previous quarter.
22 Due to confidentiality on the OTC transactions, prices used in this section correspond to index prices published by
Day-ahead prices on the French wholesale markets
Daily data
-10 15 20 25 30
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11 Price in
€/MWh
-1,50 -1,00 -0,50 -0,50 1,00 1,50 Diff PEG Sud - PEG Nord (rhs) D-A PEG Nord D-A PEG Sud D-A PEG Sud-Ouest
Source: Powernext
Day-ahead contracts registered a bearish trend across the European hubs in July, as a consequence of warmer temperatures and comfortable supplies. Prices increased in august, driven by temperatures below the seasonal norms and storage filling. This bullish trend was increased at the end of the month by unexpected problems at the Europipe (connecting Norway and Germany) between 25th august and 5th September. Imports from Norway to the continent were deviated to the British hub causing strong nominations at both the Interconnector and the Langeled pipes.
Interconnector’s capacity constraints caused a disconnection of Day-ahead prices between the NBP and the continent over late-August and most of September. The struggling period was followed by the annual maintenance of the pipe (between 7th and 22nd September) which supported the spread. With exports to the continent stopped, the surplus of gas at the NBP kept the Day-ahead considerably low while increasing consumption pulled up prices at the continent. With the Interconnector back on service, prices went temporarily closer before collapsing in late-September.
The average price across the European hubs dropped to 17 €/MWh at the end of September (the lowest since November 2010). According to market analysts, temperatures above seasonal norms impacted the natural gas consumption during the second half of September and the beginning of October. While Europe remained well supplied in LNG over the end of September, flexibility sources were reduced, amplifying the bearish trend on the spot. Although LNG imports to Europe were expected to decrease at the end of September due to the maintenance of LNG production facilities in Qatar, a decline of natural gas demand in Asia during the second half of September supported to LNG offer in Europe.
Day-ahead prices recover in October, with temperatures back to seasonal norms as winter takes place and supply conditions back to normal.
Day-ahead prices on the main European markets
10 15 20 25 30
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11 Price in
€/MWh
NBP Zeebrugge TTF NCG
Source: Heren
D) Futures prices in Europe
During the third quarter of 2011, the futures price across the European marketplaces rose on average by 4% compared to the previous quarter (32% year-on-year). At PEG Nord, the Quarter contracts registered 27.1 €/MWh, an increase of 13% from 24.9 €/MWh over the last quarter. With winter season beginning next quarter, these products come closer to the Season contracts.
Between June and July, prices of Month contracts decreased by 4%. They increased by 2% in August and by 15% in September, as a consequence of the increasing consumption and the uncertainty around the maintenance of LNG production facilities in Qatar. Month contracts were stable over the end of August and the beginning of September at 26 €/MWh, before following a bearish trend until the end of the quarter. This trend can be explained by the correction of consumption estimations for October and by the comfortable supply (especially of LNG) in the short term.
The price of Season and Year contracts was not affected by the strong variations of the Day-ahead
and remains stable during the third quarter of 2011. These products registered on average 27.4 €/MWh, an increase of 3% compared to the last quarter (26.8 €/MWh). The geopolitical and
economic contexts in Europe contributed to long-term prices stabilization.
Futures prices on the French market
10 15 20 25 30
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11 Price in
€/MWh M+1 (Fr) Q+1 (Fr) S+1 (Fr) Y+1 TTF Y+1 NBP
Source: Heren
3. The wholesale market in France
Most of the wholesale activity in the gas market takes place over-the-counter, through direct transactions or through intermediaries (brokers and trading platforms). The volume of OTC transactions is made public by CRE (see CRE’s wholesale markets “cahier d’indicateurs”). The deliveries resulting from these transactions take place at Gas Exchange Points (PEGs), which are virtual points allowing the exchange of gas within each balancing zone. The deliveries observed on the PEGs result from:
− OTC transactions concluded between suppliers;
− transactions concluded in the organized market;
− the deliveries corresponding to the gas release program;
− gas supplies to network operators for their own needs.
The following graph shows the Day-ahead nominations at the TSOs made by the participants on the wholesale market. So, it does not represent the volume of the transactions observed over the period, but the volume of net deliveries resulting from OTC transactions and organized market.
Volume of net deliveries on French wholesale gas market
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38
Apr-06 Jun-06 Aug-06 Oct-06 Dec-06 Feb-07 Apr-07 Jun-07 Aug-07 Oct-07 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11
TWh
Source: TSO – Analysis: CRE Gas supplies to network operators and gas release flows are included in this chart.
During the third quarter of 2011, gas deliveries at PEGs were around 110 TWh, representing an increase of 10% compared to the previous quarter. This volume increased by 48% year-on-year.
A) Evolution on intermediated market
The activity at the French intermediated market declined by 10% during the third quarter of 2011, registering a trading volume of 119 TWh cons 90 TWh in the second quarter of 2011. This reduction of traded volumes was driven mainly by the Quarter (-70%) and the Season (-34%) contracts, which weighted more than the increase experienced by other contracts (9% for the Day-ahead and 30% on average for the rest).
During the third quarter of 2011, the traded volume (40 TWh) doubled year-on-year. The traded volume also doubled on the Futures market, registering 52 TWh as against to 23 TWh last year. This increase was driven by the Month (+142%), Season (+126%), Quarter (+75%) and Year (+29%) contracts.
The Futures market represented 64% of the whole traded volume during the third quarter of 2011, compared to 58% during the same period last year.
Traded volumes in the spot market were 29 TWh during the third quarter of 2011, a gain of 72% from 17 TWh during the same period last year. Day-ahead trading increased by 58% year-on-year, from 11 TWh during the third quarter of 2010 to 17 TWh in 2011. The traded volume doubled year-on-year on Weekend and Other spot contracts, totalizing 12 TWh during the third quarter of 2011.
The spot market represented 36% of the traded volume during the third quarter of 2011, compared to 42% during the same period last year.
Traded volumes by product on the French Gas market
2008 2009 2010 Q3 2010 Q3 2011
Volumes TWh
Day Week-end Other Month Quarter Season Year
66 TWh
149 TWh
81 TWh
40 TWh 246 TWh
Source: brokers, Powernext; Analysis: CRE
B) Activity on organized markets and international comparison
The number of transactions at the Powernext Gas Spot platform in France during the third quarter of 2011 amounted to 5,972, dealing with a volume of 8.5 TWh (66% less than the previous quarter).
During the third quarter of 2011, the traded volume at the Powernext Gas Futures platform registered 7.2 TWh at the PEG Nord (11% less than last quarter). The activity at the PEG Sud-Ouest declined considerably during the quarter, with only four days of activity in August and one day in September.
Average monthly volumes of transactions on organized markets in France (All maturities combined)
0
Powernext Gas Futures PEG Nord Powernext Gas Spot PEG Nord Powernext Gas Spot PEG Sud Powernext Gas Spot PEG Sud Ouest
Source: Powernext – Analysis: CRE (November data: from the 26th to the 30th of November 2009)
Average monthly volumes of transactions on main European power exchanges – Third quarter 2011 –
0,0 2,0 4,0 6,0 8,0 10,0 12,0 14,0 16,0 18,0 20,0 22,0
TWh
Future 2 20 4
Spot 3 1,4 0
France Powernext Netherlands APX NL Germany EEX
Sources: Powernext, APX, EEX –– Analysis: CRE
During the third quarter of 2011, the activity in the short-term markets increased in France (+ 51%) and Netherlands (+ 115%) compared to the previous quarter, while it declined in Germany (- 53%). In the long-term market, the traded volume declined in France (- 11%) while it progressed considerably in Netherlands (+ 63%) and Germany (+ 155%).
The activity in the European wholesale markets increased (+ 56% of traded volume) compared to last quarter, driven mainly by the TTF (+ 66%, which represents 8.3 TWh). In France, the development of the spot market compensated the decline on futures contracts activity. The National Balancing Point (NBP) remains the most mature and liquid market and keep an influence on the continental hubs, especially those which are physically interconnected (TTF and ZEE through the BBL and the Interconnector pipes, respectively). The activity at the TTF hub is continuously increasing in both volume and number of transactions due to the flexibility of its gas supply, its proximity to other physical reserves (UK and Norway) and because of the possibility of trading 24h/24h on natural gas market through APX NL. In France, the PEG Nord keeps its propinquity with both the TTF and the NCG and its growth in liquidity.
4. Gas infrastructures
During the third quarter of 2011, the use of the interconnection between GRTgaz’s North and South zones (in the north-to-south direction) declined when compared to the same period last year. Use rate of Firm capacities was 74% over the third quarter of 2011, compared to 78% last year.
First results of the market coupling mechanism implemented between the GRTgaz’s North and South zones (since 1st July 2011) are satisfying according to its objectives (i.e. a progressive convergence of spot prices between the PEG Nord and the PEG Sud, and a growth in liquidity at the PEG Sud). Over the 10 GWh per day of firm interconnection capacity offered by the market coupling mechanism, 56%
were reserved between 1st July and the 30th September 2011. The average price of north-to-south capacity was 0.03 €/MWh over this period.
During the third quarter of 2011, 49 cargos (36 TWh) arrived to the three LNG terminals in France, compared to 54 over the third quarter of 2010 (38 TWh). The Fos Cavaou terminal, operating at full
capacity since November 2010, received 13 TWh during this quarter (36% of the whole LNG imports in France over the period).
Similarly to 2010, the storage levels were lower compared to previous years during the third quarter of 2011. At the end of September, the sum of gas stocks between Storengy and TIGF were 123.3 TWh.
This is explained by the decline in competiveness of storage compared to the rest of flexibility sources.
5. Concentration of the French gas market
At the end of the third quarter of 2011, 96 market players were active at the PEGs. Among them, 42 were active on Powernext Gas Spot and 36 on Powernext Gas Futures.
A) Concentration of the French PEGs
The graph below shows the Herfindahl-Hirschman Index (HHI)23 for the different French wholesale market segments. This index is calculated on the basis of removals and deliveries nominated to GRTGaz or TIGF, and not on transactions in the market during the period.
During the third quarter of 2011, market concentration on both buying and selling at the PEGs Nord H and Nord B increased from the last quarter. At the PEG Nord B, the strong concentration is due to the weak number of players in the market (only one alternative supplier purchased and two sold during this period). Despite the slight increase in concentration at the PEG Nord H during the third quarter of 2011, it remains the less concentrated hub in the French market.
Concentration declined at the PEG Sud (for both buying and selling activities) during the third quarter of 2011. The PEG Sud-Ouest registered a higher purchasing concentration (driven mainly by alternative suppliers) and a lower selling concentration compared to the second quarter of 2011.
HHI concentration index – Sales on PEGs – Third quarter 2011 –
Sales PEG Sud Sales PEG Sud Ouest
Sources: GRTgaz, TIGF – Analysis: CRE
23 The HHI equals the sum of the actors’ market shares squared, and measures market concentration (the higher the index, the more concentrated the market). Generally, a market is considered to be weakly concentrated if its HHI is below 1,000, and highly concentrated if it is over 1,800.
Given the specificities of the gas market, this index should only be used cautiously as an indicator of the competition level.
Indeed, regarding the gas market, concentration and competition are not as directly linked as in most markets.
HHI concentration index – Purchases to PEGs
Sources: GRTgaz, TIGF – Analysis: CRE
B) Concentration of the French interconnections
The following graphs show the concentration of the French imports and exports (at the interconnection points of the transport system).
During the third quarter of 2011, the part of the incumbent suppliers on exports declined considerably, as compared to the previous quarter. Selling concentration remains higher than the buying equivalent.
HHI concentration index – Imports/exports – Third quarter 2011 –
Gross imports Gross exports
Without historical
Electricity and gas market observatories combined glossary
Delivery on the wholesale market: Daily declaration of a market player to a system operator, of the gas or electricity exchanges taking place the following day with each of its counterparties, Each delivery can result from one or several transactions concluded beforehand on the wholesale market, Gross sales: Gross sales are equal to the sum of:
• the number of sites which have been connected (contract under regulated tariffs or at market prices)
• the number of sites which have switched to another supplier
Local Distribution Company (LDC): a non-nationalized distributor which distributes electricity and/or gas within a delimited territory,
Number of sites: By agreement, the data regarding the number of sites for month M (or quarter Q) will include:
• site connections carried out during month M (of quarter Q),
• supplier changes carried out during month M (quarter Q)
Numbers of sites are rounded, but alternative supplier’s market shares are calculated from real figures,
Site: a gas or electricity consumption point for a given customer, One site may include several delivery points (meters), A given customer may have several sites,
Site connection: a customer which connects on a new site, There are two possible situations:
• Connection on a new site: a customer moves into a newly-built site, which involves that a meter must be installed and that premises should be connected, E,g, a mechanic which will move into a newly-built garage,
• Connection on a current site: a customer moves into a site, after that another customer has left it, which involves that the meter has already been installed, The connection must be made to allow the new customer to be supplied with energy,
Site with contracts at market prices: a site which signed a contract at market prices with the incumbent supplier or with an alternative supplier,
Transaction on the wholesale market: Conclusion of a contract between two wholesale market players, relative to the delivery of gas or electricity for a determined period of time, at a given price, The number of transactions in a market represents its level of activity, or its liquidity,
Wholesale products:
Day-ahead: a contract agreement signed for delivery the day after,
Forward: a standard contract agreement for delivery of a given quantity at a given price, for a given maturity (OTC markets),
Future: a standard contract agreement for delivery of a given quantity at a given price, for a given maturity (organized exchanges),
The maturities may differ across power exchanges (weekly, half-yearly, quarterly, monthly, annually), Maturity Y+1 corresponds to the calendar year after the current year,
Specific electricity market observatory glossary
Alternative supplier: alternative suppliers encompass non-incumbent suppliers, The companies which activity is followed through the observatory are:
• balancing responsible entities if the supplied sites have a transmission or a distribution contract
• suppliers if the supplied sites have an integrated supply contract
Incumbent supplier: incumbent suppliers encompass EDF, Local Distribution Companies (LDC) and their subsidiaries, An incumbent supplier is not considered as an alternative supplier out of its historical distribution area,
Main electricity power exchanges in Europe (electricity):
• PWX: French Powernext power exchanges, non mandatory (www,powernext,fr),
• EEX: German European Energy Exchange power exchanges, non mandatory (www,eex,de),
• APX: Dutch Amsterdam Power Exchange power exchanges, mandatory for imports and exports to the Netherlands (www,apx,nl),
• Omel: Spanish pool, almost mandatory (www,omel,es),
• NordPool: Scandinavian power exchanges, non mandatory (one of the power exchanges in Europe, www,nordpool,no),
Non-interconnected territories: areas of the national territory which are not connected (by electrical lines) to the mainland continental system (Corsica, Martinique, Guadeloupe, Reunion, Guyana, Saint-Pierre and Miquelon and the islands of Molène and Ushant),
Number of sites: In order to count the sites, sites with different suppliers are affected to their main supplier (transmission or distribution contract sites are affected to their balancing responsible entity),
Retail market segments: the non-residential customer market is divided into four segments:
Large non residential sites: sites whose subscribed power level is at least 250 kW, These sites include large industrial sites, hospitals, hypermarkets, large buildings, etc, (with an annual consumption generally over 1 GWh)
Medium-sized non residential sites: sites whose subscribed power level is between 36 kVA and 250 kW, These sites correspond to SME premises, for example (with an annual consumption generally between 0,15 GWh and 1 GWh),
Small non residential sites: sites whose subscribed power level is below 36 kVA, These sites correspond to the professional mass market (private professionals, trades, etc,), Their annual consumption is generally under 0,15 GWh,
Residential sites: Residential sites whose subscribed power level is below 36 kVA, Their annual consumption is generally under 10 MWh,
Residential/non residential segmentation is established by DSO on the basis of historical data, or on suppliers’ declarations,
TaRTAM: transitory regulated tariff for market adjustment, Unless specifically specified, TaRTAM sites
TaRTAM: transitory regulated tariff for market adjustment, Unless specifically specified, TaRTAM sites