The Romanian competition council supports proposals for gas trading on a single bourse if it helps build liquidity and transparency, the authority’s president told ICIS in an interview on Thursday.
Bogdan Chiritoiu said existing legislation had allowed multiple platforms to operate in the gas market, but added there may be a possibility for trade to happen on a single bourse also.
Chiritoiu’s statement to ICIS contradicts previous views expressed in the local press this month when he reportedly suggested that Romania could have two bourses work alongside each other.
“We [the competition council] don’t have a clear-cut position,” he told ICIS. “We support a single exchange as long as it operates well.”
Under latest proposed amendments to the gas law passed in the parliament’s committee for industry and services this month, a single exchange with a small number of platforms will be in place that gas companies will have to trade all volume on.
Currently most transactions happen bilaterally, but liquidity has also been soaring on the gas platforms of the Romanian Commodities Exchange (BRM).
If proposals are approved by parliament, wholesale trading could be concentrated on state-owned energy exchange OPCOM, which has so far failed to attract significant interest from participants, according to a statement by OPCOM sent to ICIS in March.
The proposals have drawn a flurry of criticism from numerous institutions including the European Commission, the European Federation of Energy Traders (EFET), the Pan-European Gas trading platform (PEGAS) and Romanian lobby groups.
Stakeholders have warned that the restriction of trading to a single bourse would raise competition law concerns and obstacles to the implementation of EU rules for balancing and trading.
Speaking to ICIS, Chiritoiu said he had “browsed” the letters sent by Romanian and European institutions after receiving them last week.
However, he added that if parliament considered a bourse monopoly more suitable, the council, the self-stated role of which is to establish and guarantee the development of market competition, would support such an obligation.
He said the gas platforms operated by BRM could not provide a reference price to the market, as transactions were carried out in a bespoke rather than standardised manner.
An an example of a possible approach, he quoted the OPCOM electricity platform, which offers a reference price to the market. The benchmark refers to the day-ahead price for electricity.
OPCOM and BRM do not offer day-ahead gas platforms, but have applied to the regulator ANRE for licences to operate one.
Chiritoiu added that a single bourse would help to whip up liquidity as companies would be required to trade 100% of their volumes on the OPCOM platforms.
OPCOM’s three gas platforms are kitted out with trading equipment provided by Trayport and Nasdaq, but have so far seen reduced trading activity.
In contrast, the volume of transactions on BRM had soared to 25TWh in the first five months of 2017, compared to 15.5TWh throughout 2016, covering nearly 30% of total consumption.
Furthermore, Chiritoiu added that over-the-counter (OTC) trading was not “suitable” for Romania, noting that trading on exchanges would bring a greater degree of transparency.
Need for flexibility
Romanian and foreign shippers have insisted that bilateral and OTC trading was necessary for the market in order to ensure greater flexibility, which standard contracts offered by exchanges cannot bring.
In a letter addressed to Romanian authorities including Chiritoiu and Iulian Iancu, the chair of the committee for industry and services who spearheaded the single-bourse proposals, the Romanian exploration and production companies association ROPEPCA said the proposals were likely to bring a number of restrictions to the market.
“If finally enacted, the amendments voted by the committee will likely have negative consequences on the upstream natural gas industry and the national and regional security of gas supply in the short-, medium- and long-term,” the letter said.
ROPEPCA said the obligations would result in discrimination between gas trading rules for domestic natural gas and the rules applicable to imported natural gas. This is because foreign producers, such as Russia’s Gazprom, would have the right to enter into direct bilateral contracts with large Romanian consumers, unlike domestic gas producers which would have to sell their volume on the exchange.
Chiritoiu said Romanian authorities were looking into the possibility of establishing separate trading rules for any gas produced onshore or offshore in the future. He said he would also examine the implications of restricting cross-border trading to a single bourse.