Southern France Gas Trading Hubs to Merge

The two gas trading hubs in the south of France will merge on April 1, power trading group Powernext said on Tuesday, marking a first step towards a unified French gas platform aimed at preventing the large price swings currently seen in the market.

 

France is divided into three gas hubs, but pipeline bottlenecks between the northern hub called Peg Nord and the southeastern Peg Sud prevent Norwegian and Russian pipeline imports from flowing to the south of the country.

 

This makes Peg Sud, and the third gas hub, TIGF, in the southwest, more dependent on relatively more expensive liquefied natural gas (LNGLF) (LNG) imports, weighing on local industry's competitiveness.

 

The spread between Peg Nord and Peg Sud day-ahead gas prices, which last stood at 0.25 euros per megawatt-hour (MWh), reached a record of 12.29 euros in December 2013 on the French gas bourse Powernext.

 

On April 1, the existing Peg Sud and Peg TIGF, which have been trading on Powernext since November 2008, will be replaced by a common market area under the name Trading Region South (TRS), with spot and futures contracts tradeable from March 31.

 

"A more liquid southern French area will help our members to balance their portfolio in this region where volatility is comparatively much stronger than on Peg Nord," Powernext Chief Executive Jean-François Conil-Lacoste said in a statement.

 

Thierry Trouve, chief executive of gas grid GRTgaz, said the TRS hub was a first step towards the creation of a single wholesale gas market in France by 2018.

 

French energy watchdog CRE has worked on stop-gap measures to bring gas prices in the south down closer to levels in northern France until new pipelines can be built around 2018 to better link the two regions.