LNG Common Electronic Platform - Moving From Complex To Simple

• | A substantial share of information about the European regasification capacity remains a grey area. 
• | There are currently 37 operating terminals, and more are to be built by the end of 2023 (currently in the EPC stage, or the planning stage FEED, FID).
• | Working on a design of a digital solution - “multi-Terminal Calculator" will be essential. In the proposed framework, users would have the right tool designed to facilitate the entire process of acquiring information in a more versatile way in terms of having a good grasp on the tariff tables and fees for more than one Terminal.
• | Information at the proper time with minimum effort
• | Connecting the European gas market - Terminal Operators and Shippers
• | “more information leads to better decisions, whatever gets measured, gets managed”

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A few months ago, it was necessary to figure out another major question in the EU energy sector, notably how furtherly to improve the LNG import capacity market. First thing which Consulting companies with vast IT potential should aim will be at looking for the specific ‘sweet spot’, synergistic relationship between Energy and Software. The suggested LNG Common Electronic Platform proves to be the missing piece of the puzzle, which will do its bit in connecting the European gas market - Terminal Operators and Shippers, primarily used for exchanging regasification capacity at primary and secondary market level, hence achieving flexibility in deployment and operations. The region I reside is less developed as regards to energy economics, energy security and energy infrastructure, which definitely provides plenty of business scenarios for showing the actual benefit of the proposed unified LNG Terminaling platform (e.g., Three-Seas Initiative (3SI)).

A starting line would be an excerpt from the European Commission statement, namely that “Energy system integration is the coordinated planning and operation of the energy system ‘as a whole’”. The proposed Common Electronic platform is anchored largely on the overarching principle, notably “more information leads to better decisions, whatever gets measured, gets managed”. This principle is slated to get more challenging, on the account of the pace of LNG maturation, short-term trade growth, exponentially increased supply, and price competition worldwide. I tend to think that this could be the digital backbone complementary to the physical connection between terminals and markets established in parts of Europe, which are still 'under development' .

               Unified LNG Import Platform fully in tune with the EU Projects of Common Interest (PCI)

The EU LNG Import market requires a centralized optimization and boking platform, well-functioning, easy-to-use as an essential prerequisite for the secondary regasification market, where a single platform seems preferable as it aggregates the capacity into a pool of bids and offers, embracing the EU LNG import connection points. All in all, this will be the pro-competitiveness step, propping up the cross-border capacity and coupling the overall capacity, it is worthy to see for example the “Three Seas Initiative” - North-South gas corridor PCI and the completion of ‘Single market’ and how all this is fully aligned with it, while bolstering the security of supply to all the countries alongside the North-South gas corridor, linking the Polish LNG Terminal “Świnoujście”, Lithuanian "Klaipeda" LNG FSRU and Croatian "Krk" LNG Terminal, bringing forth strategic level decisions involving flexibility into short-term to mid-term capacity allocation and deployment of LNG carriers and gas flow management. In order to get ourselves up, one should not underestimate the firm commitment of the EU to the LNG, particularly in the wake of the Russian-Ukraine conflict(the recently organized high-level roundtable for joint gas purchases platform), and the conceivable regulatory push coupled with strong demand pull (similar to the Third Energy package), aimed at attaining an enhanced control on the gas supplies and in like manner a regulatory intervention for adopting more precise capacity allocation and scrupulous management on the LNG import in furtherance of a more rigid security of supply. 

Alternatively, the platform could serve also as complimentary to the existing one, operated by the Terminal allowing to get the most out of the Terminal capacity and altogether building a robust digital backbone network between the Baltic, Adriatic and Black Seas in furtherance of a higher security-of-supply to which I strongly believe, all of us are determined for.

               LNG Common Electronic Platform will shine a fresh light on LNG Terminaling Services

To whoever states the capacity nowadays does not need to get facilitated, I would advise him to look back 10 years ago with the point-to-point contracts and LNG expenditures which tended to double the current ones. The number of importing and exporting countries has grown to 65 and more than 200 counterparties with an influx of Liquefied Natural gas in the Old Continent making Europe the third largest region for LNG import, reaching almost 80mtpa out of 356mtpa LNG global trade volume. In addition, LNG trade is growing seven times faster than pipeline gas, and by 2035, it will account for around half of all globally traded gas, meanwhile once used over very long distances, now due to Technology-Edge, Scalability and Commoditization. Based on the observations made, I'd rather make a point that LNG is becoming feasible for increasingly shorter distances with a greater share of the flexible contracts, where a Single platform could be the key to bridging the divergent interests of LNG participants, streamlining capacity flow management and reducing the transaction cost incurred for the LNG Terminal Operator.

The suggested Platform will represent a privacy preserving platform. All the tariffs and fees should remain proprietary information to the given Terminal, keeping the privacy of all the sellers, buyers, bidders and browsers(such as contracts, traders list, pricing list and structure, regasification capacities, documentation,  pricing calculation methods, all business and financial information, along with all the technological and operational information) to the Terminal operator, visible only to the users of the Platform and marked as confidential and protected from the external ones (also, admission requirements and criteria for the users will be fully at the discretion of the Terminal Operators).

I do not necessarily imply that there are significant market failures, it’s rather the opposite, EU gas market is being in its prime, more open, transparent, and flexible than ten years ago, but just as it was quoted in LNG Journal, it will “shine a fresh light on LNG Terminaling Services”.

Main functionalities:

• Primary capacity market exchange
• Secondary capacity market exchange - Although the sector is dominated by long-term contracts, some secondary markets have emerged to enable shippers to adjust their long-term positions in response to short-term fluctuations in demand through securing additional capacities, also managing constraints by soliciting bids to buy and sell gas through its centrally operated spot market. The spot market provides a mechanism for participants to trade their imbalances through a competitive bidding process.
• Data (Tariff table) collection tool – designed to collect commercial information.
• Swap/ Virtual counter-flow (Backhaul) - Pipeline direction, pipeline capacity and the location of supply and demand for gas impose physical limitations on the market for gas. This section considers the use of backhaul arrangements and swap arrangements to overcome these physical limitations.

 

The value added of this common platform would be exactly in enhancing the cross-border capacity trading, connecting regions, simplifying and streamlining LNG regasification capacity trading

Capturing more demand in high demand cases, inarguably reducing financial losses in a downside demand scenario by optimizing the short-term capacity allocation and exchange,

Information at the right time with minimum effort, notably at reduced Transaction cost (Searching and Information cost, contracting cost);

Altogether building a robust digital backbone network between the Baltic, Adriatic and Black Seas in furtherance of a higher security-of-supply to which I strongly believe, all of us are determined for.

From where I stand, I clearly presume that LNG Terminal Operators should find a way to cooperate and even collaborate with energy experts and software companies to overcome this troublesome situation, the least they could do is providing real price data, used to feed the Platform Database. LNG Terminal Operators should not treat the LNG regasification market as one-off deal of long-term capacities without having a good foresight and being strategic about the short-term market dynamics, notably the spot-market; in fact, it is quite the reverse, LSO should find themselves at their customers reach, starting with the customer experience and problems(and the expanding short-term and secondary market is one such concern).
Set side-by-side with the public interest, with the help of each energy player the access to liquid LNG markets could be brought to a completely different level, by overcoming these barriers which is entirely oriented to be in favor of the LNG Shippers and LNG Import terminal Operators; having said that, only with join efforts the spotted aspects of the EU LNG regasification capacity market would get acknowledged. The value added would make sense in paring down the notable differences between terminals, through which improving the flexibility for the sake of increasing the consumer’s interest, to which I strongly believe all of us are determined for.

Reference list:

1. ROITI ltd. 'Fee Capturing Tool' - https://roiti.com/blog/terminaling-services-fee-capturing-tool/ 

2. Gas Infrastructure Europe - https://www.gie.eu/transparency/