Discussions are underway in the European Union (EU), Singapore and Turkey to create new natural gas hubs based on the U.S. Henry Hub model, according to the latest article of Branko Terzic, a senior fellow with the Atlantic Council Global Energy Center late Thursday.
Terzic said that these new potential hubs would provide pricing points for spot markets transactions and gas futures trading.
According to Terzic, these hubs would also facilitate gas purchases and sales at specified points to enable financial trade and provide a recognized location point for published natural gas prices and transparency.
However, he said that to do so, the new hubs would need to have adequate natural gas pipelines and natural gas storage infrastructure in place.
'In addition to these, there should be access to diversified gas supplies available from a competitive market. Natural gas should be deliverable to the hub by third party/open access to pipelines operating under acceptable regulatory conditions,' Terzic noted.
He said that other factors need to be considered, including tradable transmission rights on pipelines, an operating liberalized natural gas market with no governmental price controls on natural gas and an established hub operator and exchange system.
Terzic, however, cautioned that at present these preconditions for successful new natural gas hub operations are a tall order to fulfill.
'The EU may have the most difficult barriers to overcome in establishing a competitive gas hub, given the nature of internal gas markets and the lack of a central regulator to enforce uniform policies across all member states,' he said.
He said the EU may have sufficient supply diversity in natural gas from its four principal suppliers, Norway, Algeria, the Netherlands, and Russia, together with more than a dozen operating LNG receipt terminals and gas storage at many market areas.
'In addition, the EU may obtain additional future supplies via Turkey from the Middle East, Eastern Mediterranean discoveries, and fields in the Caucasus,' he said.
But he warned that as long as the EU is unable to implement a single gas pipeline policy and have it enforced the same way in every member state, ideally by an EU wide regulator, the goal of an efficient and competitive single natural gas market will be elusive—and the dream of building an effective gas hub even more so.
Terzic signaled that the Henry Hub in North America is the most successful natural gas market in the world and stands as an example for other gas markets to emulate.
The expert said the creation of a natural gas hub is perceived in international quarters as a means of meeting national goals for competitive natural gas supplies and delivery, providing market prices to producers and consumers, and creating a security of supply based on diversification of sources.
'This U.S. hub trades the third-largest commodity futures contract in the world by volume and the price has become a national benchmark for natural gas with growing global reference,' he said.
'The U.S.’ Henry Hub provides the example of a hub which delivers reliable and transparent price signals and liquid contracts,' he added.
He noted that this success is measured in terms of increasing trade volumes; a large pool of customers trading standardized natural gas products, and services at adequate churn rates.
- Turkey's desire to become gas hub
For the last two years, Turkey has voiced its desire to become a natural gas hub in the region.
Turkish Energy Minister Berat Albayrak said late last year that Turkey would take concrete steps to utilize its geopolitical position near oil and gas-rich countries in the Middle East, Caspian and Central Asia to become an energy-trading hub.
He affirmed that Turkey's geopolitical position could play a crucial role in projects to diversify energy resources and transportation routes and fill the gap in the inactive energy market in southeastern Europe.
The U.S. Energy Information Administration (EIA) confirmed this in its report in 2017 when it highlighted the growing importance of Turkey’s geographical position as an oil and gas transit hub.
Turkey already has two crude oil import pipelines - the Baku-Tbilisi-Ceyhan (BTC) pipeline from Azerbaijan and a pipeline from northern Iraq, which stretches from Fishkhabur, on the Iraq-Turkey border, through Kirkuk in Iraq to Ceyhan in Turkey.
The country has direct natural gas pipelines from Iran, Azerbaijan and Russia, and in the future will have additional transit infrastructure in place including the TurkStream natural gas pipeline.
The TurkStream natural gas pipeline will be active in the coming months and will bring 15.75 billion cubic meters of Russian gas directly to Turkey.
Turkey also benefits from LNG supplies and brings LNG to its terminals from Algeria, Qatar, Norway and Nigeria.
Additionally, Turkey's first Floating Storage Regasification Unit (FSRU) was launched in Aliaga, Izmir in December of 2016.
Since then a second FSRU with 20 million cubic meters of send-out capacity per day, was launched in Hatay - a province in the Mediterranean region in early February 2018.
By Murat Temizer
Anadolu Agency
energy@aa.com.tr