- The Writer holds an MSc in Eurasian Political Economy & Energy from King’s College London and also an MA in European Studies from Sabancı University.
Rotterdam, as a well established European trading hub which acts as both an arrival and distribution point for oil and gas as well as one of the largest industrial and logistic clusters, ensures that various sources of energy commodities converge. As a European gateway for oil and gas transition, Rotterdam provides a perfect location with its economy of scale and reliable services.
Thanks to the half-century experience of well-developed knowledge in the sector, Rotterdam has laid foundations for game-changing innovations and research and development in the oil and gas sector.
The total length of transmission network in Netherlands is around 12,050 kilometers and as of 2015, overall gas storage capacities reached 13.3 billion cubic meters (bcm). Gas storage facilities are dispersed in different parts of the country in places like Norg, Alkmar, Epe, Bergermeer, Grijpskerk.
According to 2015 figures provided by the Dutch Ministry of Economic Affairs of the Energy Market Directorate, the total volume of exports reached 58 bcm. While the Netherlands consumed 31.8 bcm of gas, 43 bcm was produced in 2015, according to BP’s statistical review of world energy 2016.
The Netherlands has been one of the key gas producers and one of the main distribution centers for Northwestern Europe for the last fifty years. Although, it is estimated that production from one of the major gas production fields in Netherlands, the Groningen field, is set to continue for decades to come, total production has been in decline. As well as the Groningen field, numerous other offshore and onshore gas fields contribute to overall gas production.
According to the Dutch Energy Market Directorate’s projections, the overall production of the Groningen field in 2020 is expected to be 39 bcm while this number precipitates a decline in volumes to 26 bcm by 2025 and falling off to 12 bcm in 2030. However, it should be noted that large volumes of gas reserves in storage are not a requirement for an energy hub but rather there is a vital need to have great volumes of gas flowing to the hub, which has been the case for Baumgarten in Austria (see my previous analysis).
Rotterdam provides optimum grounds for an energy hub with its liberalized market and number of active players in the gas sector. Combined with a high transmission network supported with underground storage reservoirs, and with the largest Title Transfer Facility (TFF), which offers the opportunity to transfer gas that is already in the system, as well as a well-functioning APX-Endex gas exchange, Rotterdam is a pioneering gas trading center.
As a well-established gas trading hub, Rotterdam is linked to the global gas market and operates as both producer and trader. Currently, many of the gas consuming countries in Northwestern Europe have been benefiting from TTF as a virtual trading hub and a benchmark that allows gas to be transferred to another party - a network that outpaces other trading centers. The system ensures the balance between supply and demand, and buyers can take delivery at any time while the vendors can supply gas at any point to the network. An advanced level of networking and transfer facilities is a must to provide safe and secure supply to the end user.
Additionally, the formation of an APX-Endex gas exchange for a secure, transparent electronic trading environment facilitates gas trading on the sport market and in future markets. The establishment of this exchange has contributed to the integration of the gas market in the EU.
The establishment of a virtual trading point, created through APX-Endex and the TFF as benchmarks for a gas trading hub, should benefit other countries which are seeking to become genuine energy trading hubs and integrated, consolidated energy exchanges. Therefore the development of an integrated and liberalized gas market that ensures a balance between supply and demand and functions in line with other major gas hubs in Europe, would help countries that have ambitious plans in becoming an energy trading hub. By working towards having these optimal market conditions, a country’s position can be elevated from solely serving as a transit point for gas and oil.
- Opinions expressed in this piece are the author’s own and do not necessarily reflect Anadolu Agency's editorial policy.