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Gas Trading Manual

A comprehensive guide to the gas markets (Second edition)
 

Edited by David Long, Geoff Moore and Gay Wenban-Smith

With a host of distinguished contributors, the publication, a companion volume to the Oil Trading Manual is the definitive study of the complex and, to most, baffling minutiae of the rapidly changing natural gas market.
EP Global Energy

Much has changed in the international gas market since the first edition of Gas Trading Manual was published in 2001. As expected progress has continued towards greater market liberalisation. European gas and electricity markets are gradually being opened up to competition and EU energy ministers have finally agreed to speed up the process, setting a new target date of July 2007 by which time all consumers must be able to choose their gas supplier. At the same time mergers and acquisitions have changed the corporate landscape creating big new multinational utility companies with new priorities. Confidence in the role of trading has been hit by corporate failures such as the collapse of Enron which has forced many companies to re-evaluate the role of trading in their businesses. Nevertheless trading is here to stay and the opening up of the European gas and electricity markets continues to foster the development of new market structures wherever they are needed.

     

Full Description

The new edition of GTM takes all these changes into account whilst presenting the single most complete source of information currently available on the international gas markets. GTM is the leading information source on this complex industry and this new edition is set to further enhance its reputation.

The manual is divided into four complementary parts:

Part 1: Introduction to gas trading. Covers the changing nature of the gas business, fundamentals of the market, supply and production, the different markets for gas and introduces the main trading instruments, including weather derivatives.

Part 2: European gas market. Examines the key role of the EU Gas Directive in changing the structure of the European gas market. Focuses on the prospects for competition in Continental Europe and the UK traded gas and goes on to deal in detail with the international petroleum exchange (IPE) natural gas futures contract, the standard OTC agreement, the On-the-day Commodity Market (OCM), the Network Code, and take-or-pay contracts and gas pricing.

Part 3: Administration. Deals with the essential 'back-room' aspects of gas trading operations, including internal control frameworks, accounting for derivative instruments and the taxation of gas trading.

Part 4: Gas and Electricity. Covers the important area of the role of gas in power generation and the convergence of the gas and electricity markets.

GTM is the only publication to provide a comprehensive, regularly-updated reference source on the structure and conduct of the international gas markets. The manual covers all the major gas trading instruments and their applications, the trading centres, contracts, uses and users, and the administrative, management, tax and accounting implications of participating in them.

Compiled from the contributions of leading industry professionals, it is an indispensable practical companion for all those involved in the trading of gas.

About the editors

David Long is a Partner in Oxford Petroleum Research Associates (Opra) and specialises in the operation and development of oil and gas markets. He is a regular contributor to newsletters published by Petroleum Argus Ltd, and research reports published by the Centre for Global Energy Studies (CGES) in London. His interests include the development and application of new trading techniques in the oil and gas industries and he has been involved in the preparation of training material on swaps and options and development of computer software for analysing oil price behaviour. David began his career with BP in 1977, where he worked in Corporate Planning and Supply Departments. He spent two years on secondment at the Oxford Institute for Energy Studies, studying the development of forward paper markets in oil, before joining the institute as a Research Fellow from 1986 to 1989.

Geoff Moore Before his untimely death in July 2001, Geoff Moore was a Senior Associate Consultant at Gas Strategies, working on gas trading operations and the progress of liberalisation in Europe. He worked in the UK gas industry for most of his employed life, always at the 'sharp end', dealing with UK gas supply contracts, foreign trade and major political issues. He spent many years in a senior role at British Gas analysing and negotiating gas purchase agreements. In recent years he was closely involved with the UK-Continent Interconnector pipeline and developments in the competitive gas market in both the UK and North America. He spent a year with Natural Gas Clearinghouse (NGCH) in Houston before joining Accord Energy Ltd (a major market maker in spot gas) in the UK.

Gay Wenban-Smith Gay Wenban-Smith is an independent economic consultant and Senior Associate at Gas Strategies (where she was Managing Consultant for five years). She advises on gas purchasing and commercial issues, and strategic assessments of changing market conditions. She is also a trainer on Alphatania gas business training courses. Before joining Gas Strategies, Gay spend twlve years at British Gas Headquarters, first as economist and corporate planner and then in gas marketing (sales of natural gas to the first combined cycle gas turbine power generator in Britain) and gas purchasing, and was active in the policy decisions on the Interconnector. Before joining the gas industry, she was a member of the London Business School econometric forecasting team, moving on to the Government Economic Service in H.M. Treasury and the National Institute of Economic and Social Research.

Contents

Part 1: Introduction to gas trading

Changing nature of the gas trade

Geoff Moore and Gay Wenban-Smith

 - Prologue
 - Definitions
 - Gas market structures
 - Developing trading markets
 - Gas and electricity

Fundamentals of the gas market
David Long
 - Characteristics of the gas market
 - Natural gas
 - Demand, supply and storage
 - Appendix: Transco Network Entry Quality Specification

The geography of gas
John Hawkshaw
 - Introduction
 - Supply envelopes
 - Europe
 - Asia
 - North America
 - Latin America
 - Liquefied natural gas (LNG)

The different markets for gas
Philip Nutman
 - Introduction
 - Continental Europe
 - United Kingdom

Gas trading instruments
Sally Clubley
 - Introduction
 - Spot contracts
 - Futures and forward contracts
 - OTC derivative contracts
 - Swaps
 - Options
 - Weather derivatives
 - Appendix: Glossary of gas trading termsPart 2: European gas markets

Part 2: European gas markets

UK traded gas market
Geoff Moore
 - Origins
 - Growth factors
 - Current structure
 - Recent trends
 - Future developments

Prospects for competition in Continental Europe
Simon Blakey
 - Introduction
 - The European gas industry in 2003
 - The EU Gas Directive and beyond
 - Third party access: customer pressure
 - The UK-Continent Interconnector
 - The new European marketplace
 - Conclusion: 'Not gas, but ideology'

IPE natural gas futures
Stephen Barraclough
 - The IPE
 - The UK gas market
 - The IPE natural gas contract
 - Using natural gas futures
 - Delivering natural gas
 - Future developments
 - Appendix: IPE Natural Gas Futures Contract

UK gas trading contracts
Eldon Pethybridge
 - Introduction
 - Beach contracts: performance
 - NBP contracts
 - Price, billing and payment
 - Information and confidentiality
 - Assignment
 - Termination
 - Miscellaneous
 - Zeebrugge trades
 - Conclusion
 - Appendix 9.1 NBP 1997 terms
 - Appendix 9.2 Short term beach trading terms and conditions

OCM and the Network Code
Mike Madden and Nick F White
 - Introduction
 - Operating under the Network Code
 - Imbalance and scheduling charges
 - On-the-day Commodity Market
 - Future of within-day trading
 - Conclusion

Take or pay contracts
Michael Brothwood
 - Changing market structure
 - Take or pay clauses
 - Enforcement of take or pay obligation
 - Provisions of EU Gas Directive
 - Impact of EU competition law

Gas pricing arrangements
Michael Brothwood
 - Introduction
 - Price adjustment clauses
 - Price indexed gas markets
 - Price re-opener clauses
 - LNG pricing arrangements
 - Future developments

Part 3: Administration

Running a gas trading business
Neil O'Hara
 - Introduction
 - Energy trading and marketing
 - Internal control framework
 - Role of the gas trading function
 - Future developments

Accounting
Hanif Barma and Sangeet Dhanani
 - Introduction
 - Accounting guidance
 - General principles
 - Futures contracts
 - Forward contracts
 - Swaps
 - Options
 - Physical hedges
 - Disclosure requirments
 - Gas market issues
 - Conclusions

Taxation of gas trading
Phil Greatrex
 - Background
 - United Kingdom
 - United States (David Zimmermann & John S Levin)
 - Singapore (Alain Ahkong)
 - UK taxation of traded instruments
 - Appendix: Articles from the OECD model tax treaty

Part 4: Gas and electricity

Features

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