OREANDA-NEWS. October 02, 2014. The Expert Council on developing competition on the markets of gas, electric power and the Expert Council on developing competition on the market of financial services (the Section on organized trading) at the Federal Antimonopoly Service (FAS Russia) discussed development of exchange trading with natural gas.

Representatives of “St Petersburg International Mercantile Exchange” (SPIMEX), the Bank of Russia, as well as “Gazprom” OJSC, “Gaprom Mezhregiongaz Postavka” Ltd., “RDK” CJSC and many others took part in the meeting.

The work on developing exchange trading with natural gas is undertaken under the Protocol of a meeting of the Presidential Commission on fuel-and-energy complex and environmental safety. To support launching exchange trading, a plan was devised that includes some measures for cooperation between the authorities and business. The Working Group comprises FAS, the Ministry of Energy, the Bank of Russia, as well as “SPIMEX”, “RDK” CJSC, “Gazprom” OJSC and “Gaprom Mezhregiongaz Postavka” Ltd.

Deputy Head of FAS, Anatoly Golomolzin, presented FAS position on organizing exchange trading in the Russian Federation. He pointed out that “we plan to hold the first trading with natural gas on 24th October 2014. Prior to this, during a month traders will be trained and mock trading will take place. It is expected that around 10% of the overall supplies of natural gas to the domestic market will be sold through exchange. “Gazprom” OJSC will supply 17.5 billion per year, and independent gas suppliers – at least half of that sum. Upon the outcome of introducing exchange trading with gas we expect to form spot price indicators for a month, 10 days (a week) and a day (two days) ahead”.

“SPIMEX” President, Alexei Rybnikov, discussed organization of trading at the “Natural Gas” Section. Vice-President Mikhail Temchenko gave explanations about the market infrastructure.

Larisa Azimova, General Director of “RDK” CJSC made a presentation “Clearing of Exchange Contracts for Supplies at “SPIMEX” “Natural Gas” Section”.

The position of the Bank of Russia on regulating organized trading with gas in the Russian Federation was presented by the Head of Commodities Market Unit, of the Department for Regulating Securities and Commodities Markets, Pavel Ivanov.

“The specifics of organized trading with physical goods circulating on complex, technologically interrelated energy engineering systems such as electric power industry and gas supplies, includes not only trading procedures, clearing and settlements, but also technical support of trading”, explained Anatoly Golomolzin. “These issues concern transportation, production scheduling, accounting, planning, balancing gas production and consumption, etc.”

Gennady Sukhov, the Head of the Department of “Gazprom” OJSC for Marketing, Gas and Processing and Liquid Hydrocarbons highlighted to the expert community general issues of organizing exchange trading with natural gas.

A presentation by Deputy Head of the Department of “Gaprom Mezhregiongaz Postavka” Ltd. for Settlements with Social Consumers, Boris Chorny, stimulated a discussion on the procedures for interacting with buyers in the course of organized trading with natural gas.

Answering a question put by one expert if “Gazprom” could hamper exchange trading in some way, Anatoly Golomolzin stated that, on the contrary, “Gazprom” has all incentives to develop competition through exchange. First, the company is interested in selling gas at the market prices. Second, spot prices will enable “Gazprom” to form mechanisms for optimizing gas supply balancing, which means more efficient conditions for its work. Finally, the parity procedures, when “Gazprom” cannot sell more gas at an exchange than independent companies, stimulates the company to bring the maximum possible volumes of gas from independent traders. Trading experience at “Mezhregiongaz” Electronic Trading Site proved that such mechanisms work. Also the market situation has changed: already around 40% of total gas supplies are by independent suppliers. It means that “Gazprom” is becoming simply a dominant company rather than the monopolist in supplies.

Summing up, Anatoly Golomolzin emphasized: “Today there are all necessary organizational and legislative preconditions for launching exchange trading with natural gas. We fully took into account the experience of trading with natural gas accumulated by “Mezhregiongaz” Electronic Trading Site and experience of exchange trading with oil products at “SPIMEX”. It is an important step towards establishing fair competitive market”.