Form 552 data collected by FERC indicates that more than 2,000 companies participated in almost 56 Tcf of physical gas market transactions in 2009, about 2.5 times the volume of gas produced, according to an analysis issued by FERC’s Office of Enforcement Thursday.
The fact that the volumes are greater than the amount of gas produced is explained by the fact that the same gas can be resold several times among marketers, producers and consumers, the Federal Energy Regulatory Commission (FERC) said. In an initial analysis of the filings in October, Chris Ellsworth, energy industry analyst with the Office of Enforcement, said the “same gas change[d] hands nearly three times on average between producer and final consumer” during 2009 (see Daily GPI, Oct. 22).
The analysis found that the top 10 sellers of physical gas accounted for 33% of the total reported volumes. Monthly and daily index sales accounted for the majority of total reported volumes.
The collected data shows that transactions at a published index price accounted for 70% of reported volumes, and more than two-thirds of those transactions were based on next-month indexes, Ellsworth said Thursday. Taken together, fixed-priced transactions from bilateral deals for next-day and next-month gas accounted for 22% of total volumes. Of those, daily fixed-price deals were the majority. Transactions based on the New York Mercantile Exchange (Nymex), such as Nymex trigger and physical basis agreements, represented about 8% of reported volumes, he said.
The data displays a convergence of the futures market and the physical market, Ellsworth said.
“We see a kind of direct convergence in some of the respondents’ information in that physical basis deals and Nymex trigger deals directly correspond to financial prices — in particular, futures prices. So there’s a direct correlation there. More broadly, many of the fixed-price deals are based on the closing of the Nymex monthly deals.”
FERC’s Form 552 effort provides “added information to the market [and] advances the goal of price transparency and provides a better understanding of the formation of price indexes,” he said. “However, since the data are aggregated nationally, the actual leverage of index volumes on fixed-price volumes by trading hub is not captured by the data.”
About 20% of respondents, accounting for about 6 Tcf of the volumes reported through Form 552, reported the prices for their fixed-price transactions to index publishers in 2009, according to the analysis. Nearly 5 Tcf of the volumes reported through Form 552 were fixed-priced transactions that were not reported to index publishers. About 39 Tcf of the volumes reported through Form 552 were transacted at index prices. The reporting status of a statistically insignificant portion of fixed-price volumes was unclear.
“The data collected for 2009 shows that the respondents who reported fixed-price transactions to index publishers accounted for just 11-13% of the total gas volumes reported by Form 552 respondents,” Ellsworth said. “Thus, the data indicates that index publishers are deriving their index prices from a relatively small amount of gas volumes.”
This was the second year that companies were required to file Form 552 responses (see Daily GPI, June 29, 2009). The filings report a company’s total volume of sales and purchases for 2009; the volume of transactions that were priced at fixed prices; and the volume of transactions that were reported to price index publishers. The 700 respondents, including corporate subsidiaries, added up to 2,057 companies reporting.
Form 552 requires the participation of entities that sold and purchased 2.2 million MMBtu or more of physical gas during the reporting year. The reporting requirement sprang from Order 704, which FERC approved in December 2007 (see Daily GPI, Dec. 21, 2007). FERC requires market participants to file the reports in order to provide greater transparency concerning the use of indices to price natural gas and to determine how well index prices reflect market forces.
Just weeks before this year’s Form 552 reporting deadline, FERC had received no submissions (see Daily GPI, Aug. 20).
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