London's International Petroleum Exchange (IPE) will begin trading natural gas futures on Jan. 31, 1997.
The market will trade monthly contracts based on deliveries of gas to the National Balancing Point (NBP), a notional point within the U.K. gas transmission grid.
Lynton Jones, IPE chief executive, said, "IPE has been intimately involved in the deregulation of the U.K. gas industry. We believe that the establishment of this futures market will help contribute further to the spread of competition within this industry."
Natural gas has been traded informally by U.K. companies since the government opened the industrial gas market to competition in 1992 (OGJ, Oct. 14, p. 23).
IPE will enable traders, initially only in the London area, to trade gas contracts online. This contrasts with crude oil and gas oil dealing, which takes place on a trading floor at the IPE.
This is Europe's first natural gas trading system, and IPE hopes the London gas price will become a European benchmark, as other European countries liberalize their gas markets and its online-based trading system spreads.
IPE had hoped to introduce gas trading earlier this year, but was prevented by problems in verifying shipments from offshore fields to onshore gas terminals (OGJ, June 3, p. 31).
An IPE official said there are still problems with gas delivery at onshore terminals, but the contracts will be launched with NBP as the delivery point to avoid further delays.
IPE is still considering launching trading in contracts with Bacton terminal as the delivery point, as originally intended.
The trading units handled by IPE will be for 5,000 therms (500 MMBTU)/day of gas during the delivery month. Five contracts of 1,000 therms/day (100 MMBTU/day) will be traded at a time.
IPE said the prices will be quoted in pence sterling/therm, and trading will be in contracts as much as 12 months forward.
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