6 Mar 2013

Spot gas market intended

7:15 am on 6 March 2013

NZX intends to launch a spot gas market in June.

NZX said the new market will allow producers such as Shell and users such as Contact Energy and Vector, to better manage their supply of gas following a new, tighter operating code for taking gas from the Maui pipeline.

Maui gas contracts are mostly take or pay, though there is some flexibility around it, while Contact has built an underground facility to store gas it does not need immediately, for example during periods of low wholesale electricity prices.

NZX energy head Erich Livengood said there is enough depth in the market to allow participants to buy and sell gas on the day, or a day, week and month ahead.

Transpower has been working on developing its own spot gas market with industry producers for some time, and the national grid operator confirmed it expects to launch soon.

Mr Livengood said there's unlikely to be enough room for both.

The market will incorporate what is called a "virtual welded point", which is a notional connection to the Maui gas pipeline that provides a reference for both trading, and the physical delivery of gas.