Germany launches nationwide gas trading hub THE

A gas pipeline is pictured at the new gas import terminal of Norway's company Gassco in Emden, Germany, May 24, 2016. REUTERS/Fabian Bimmer/File Photo
  • Trading Hub Europe starts commercial operations
  • Consolidates former two market areas
  • Could speed more cross-border trading links

FRANKFURT, Oct 1 (Reuters) - Germany launched a nationwide gas market trading hub, Trading Hub Europe (THE), on Friday after merging its two existing hubs to boost liquidity and simplify administration.

The existing gas market hubs, Gaspool and NetConnect Germany (NCG), have renamed their order books to THE to continue spot and futures trading, in a move the industry has been planning since 2017 and had been testing ahead of THE's launch.

The new hub covers 40,000 km of high-pressure pipes connecting over 700 distribution networks in Germany, Europe's biggest gas consumer and importer. Previously Gaspool and NCG operated in separate regions, essentially carving Germany into two gas markets.

THE entails IT system upgrades that will offer more security of supply through standardised services to ensure overall volumes of gas removed from the network match the volume entering it, THE said in a statement.

The online hub will be overseen by Germany's energy regulator.

After the Dutch TTF and UK's NBP markets, the two German hubs were among Europe's biggest. Italy, France, Belgium, Austria and Spain also have sizeable marketplaces.

Europe's overall traded gas market was worth 680 billion euros ($787.37 billion) in 2020, turning over 70,512 terawatt hours (TWh), UK research firm Prospex said in a July report.

Some 89% of volumes in NCG and Gaspool, amounting to 4,300 TWh within last year's total, were over-the-counter (OTC) and the rest were traded on exchanges, Prospex said.

"THE will be the central starting point for further cross-border links between individual European gas markets," said Sebastian Kemper of Gaspool, one of two managing directors, the other being Torsten Frank.

Separately, online energy bourse EEX (DB1Gn.DE), which is mainly electricity-focused, said it has enabled the alignment of trading on THE for its existing gas products which, unlike purely bilaterally settled trades, offer market participants clearing house services.

EEX said it will introduce 13 new gas quality-specific products to cater for energy needs in different regions of Germany on THE's spot market.

Both its physical gas futures and new financial gas futures (EGSI Futures) will also be available.

EEX hopes to improve liquidity in its gas futures once all participants are bundled in one space.

($1 = 0.8636 euros)

Reporting by Vera Eckert, editing by Susan Fenton

Our Standards: The Thomson Reuters Trust Principles.

Thomson Reuters

Senior power correspondent for Germany with more than 30 years experience and focused on deregulated energy markets for power and gas, companies, networks, exchanges, renewables, policy, storage, future transport and hydrogen. A German native who has studied and worked in the United States and Britain.