ENTSOG South-North Corridor GRIP 2017 - Main Report

3.4.2 PRICE CORRELATION

Price correlation of the European gas hubs serves as an indicator for market integration, liquidity and competitiveness. By definition, in the absence of physical and/or regulatory barriers to free trade, gas prices at the various hubs are expected to converge. Furthermore, hub price correlation is necessary for efficient and competitive market pricing. Figure 3.32 shows the day-ahead price average trends on the seven South-North Corridor hubs and the two major European hubs (TTF and NBP). The overall analysis of price evolution over the last three years points to a high degree of price correlation, except for TRS/PEG Sud in the South of France and to a lesser extent PSV in Italy, and therefore suggests that the North-South Corridor hubs are on the good track towards a well-integrated market area. In that sense, their prices may serve as a reliable benchmark for gas prices in Europe. The price spread between PEG Nord and TRS has experienced large variations, from 0, most of 2015 and 2016 to more than 10€/MWh in December 2013, and recently in January 2017. Because of its dependence on LNG deliveries, gas prices in the South of France are reflecting marginal prices for LNG supply, and as a consequence the variation of worldwide LNG prices. The North-South Link has been marked by continuous significant usage of capacity. PSV prices remain normally higher than those of the rest of the region, with an average 1.8€/MWh premium in average in 2015 and 2016 compared to NCG, but the evolution of prices follow closely the other hubs. Several points can be made in regards to the evolution of gas prices since mid-2013: \\ An overall decrease in gas prices, from a SNC GRIP average high of 29.2€/MWh in December 2013 to a low of 12.4€/MWh in April 2016. Explanations for this decreasing trend include: – – reduction in gas demand, particularly following the very mild 2013–2014 winter – – decrease in worldwide petrol prices (see Figure 3.33) – – convergence of worldwide LNG prices, notably due to falling LNG prices in Asia until mid-2016, which could lead to a return of LNG exports to Europe \\ Increasing gas prices since summer 2016, notably following increasing LNG prices.

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South-North Corridor GRIP 2017