[Premium] Gasunie Reports Mixed Views on TTF-BBL Merger
Gasunie's Dutch gas grid subsidiary GTS and the Netherlands-UK subsea gas pipeline operator BBL Company have published responses July 21 from shippers to their joint proposal, tabled May 2017, to extend the Dutch TTF balancing area out to Bacton, England via the 235-km Balgzand-Bacton Line.
Responses have been mixed, with criticisms of an idea to spread out certain costs among all GTS grid users. A final decision is due next month.
The overall May 2017 proposal would provide the first direct interface between Europe’s two largest gas trading hubs – TTF and its now slightly smaller UK counterpart, NBP – enabling greater market integration. So far the two have been separated by the two pipelines between the two, the other line being the Interconnector.
Twelve parties responded to GTS: six shippers (Anglo-Dutch Shell, France’s Engie, the UK’s Centrica, Gazprom’s German subsidiary Wingas, Swedish state Vattenfall and Dutch GasTerra), two trade organisations (European traders association Efet and Dutch utilities group VEMW), Abu Dhabi-based Taqa which owns some Dutch storage, and there were three anonymous replies. Nine also responded to BBL (as above, except not Shell, VEMW and Vattenfall).
The anonymous replies might conceivably have come from Statoil and Gazprom, both highly active traders, or alternatively from commodity traders.
Centrica, Vattenfall and Wingas and one anonymous party said they favoured the market integration proposal, and higher TTF and NBP liquidity that could result; and the resultant increased arbitrage opportunities.
GasTerra, VEMW, Vattenfall and Efet however criticised the GTS proposal to eliminate the Julianadorp exit point by increasing tariffs at all GTS entry and exit points by 1.2% as neither fair nor cost-reflective. Vattenfall remarked that "British grid users will benefit without being charged for the transport services through the BBL."
Taqa argued that key beneficiaries of the proposed changes were long-term shippers on the BBL who in future would no longer need to pay GTS exit costs at Julianadorp (of roughly €10mn/yr at 2016 tariffs). Taqa also requested a legal opinion on the role of Dutch regulator ACM and the ministry of economic affairs in the process, expressing "surprise and concern about the limited role of Dutch competition and markets authority ACM on such a fundamental decision" to cancel the Julianadorp market entry/exit point, when it continues to operate physically.
In response, GTS acknowledged the smearing of the Julianadorp entry costs among GTS users “might have a negative effect on some” shippers, but said its view remains that they would be outweighed by benefits to all market parties from a direct connection between the two most liquid hubs in northwest Europe, increased arbitrage opportunities with an average value of €2.5mn/yr, costs reduction of €1.5mn/yr thanks to the enlarged TTF market area, and greater TTF and NBP liquidity. Consultancy Poyry has estimated the Net Present Value (NPV) of integration at €45mn over 20 years.
GTS further added that Centrica’s announcement last month that its Rough storage facility, at 3.1bn m³ the largest storage site in the UK, has closed to new injections “can be considered a game changer, as it is highly likely that it will increase transport to the UK via amongst others, GTS and the BBL pipeline.
“This might increase capacity bookings on other GTS entry points, enhance transport revenue recovery and result in relatively lower tariffs,” argued GTS in its reply to responses. GTS concluded by saying that, in August 2017, it will take a final go/no go decision on the BBL interconnector merger with the TTF.
It’s understood that that will follow opinions from ACM and UK energy regulator Ofgem. The responses from the 12 parties have been shared with both.
GTS is 100%-owned by Dutch state Gasunie, while BBL is 60%-run by Gasunie with 20% stakes held by Germany's Uniper and Belgium's Fluxys.
Mark Smedley