NZX looks to launch spot gas market in June

Stock exchange operator NZX is looking to launch a new spot gas market in June this year expanding its range of services, and providing participants a new tool to manage their supply as the sector new pipeline requirements.

The Wellington-based company's launch is contingent on securing operating approvals, and will offer a baseline market from June to allow monthly, weekly, daily and intraday products to be traded, it said in a statement. The market will use a 'virtual welded point' based on the Maui pipeline to provide a reference for trading and physical delivery, meaning liquidity in the market will be compatible with shipping arrangements.

"We already have the trading system up and running, now it's a matter of making further alterations to fine tune the market to meet traders' needs," NZX head of energy Erich Livengood said. "Once traders have had a chance to experience trading and refine their requirements, we envision introducing staged enhancements, where they make sense to the market."

State-owned electricity grid monopolist Transpower has been working on developing a spot gas market for New Zealand with support from the Gas Industry Co and industry players including Methanex, with a view to launching it before the middle of this year, according to the Ministry of Business, Innovation and Employment's September quarterly energy update.

The spot market comes as gas distributers such as Vector face regulated price cuts after the Commerce Commission reviewed network pricing.

In a 2011 report on policy considerations for New Zealand's natural gas industry, Victoria University-based research unit Institute for the Study of Competition and Regulation said there didn't seem to be "any prospect or need" for a local spot gas market.

Authors Stanford Levin and Alfred Duncan said the local market was "rather small to support one" and functions that could be provided by a spot market could be provided by flexible long-term contracts and the Maui pipeline's ability to handle overage and underage through line-packing.

Among the ISCR's members are electricity company Contact Energy and lines company Powerco.

(BusinessDesk)