The first auction offering new integrated gas capacity product along the Trans-Balkan Pipeline this morning failed to allocate any volumes, but the operators might hold another in the coming days.
The new Route 1 product bundles together capacity from Greece to Ukraine at Kulata/Sidirokastro, Negru Voda/Kardam, Isaccea/Orlovka, Kaushany and Grebenyky. The capacity tariffs equate to €6.15/MWh, flow-based charges along the route equate to an additional €0.88/MWh, and 30-day regasification and terminal fees at Revithoussa €0.95/MWh, making a total route cost — assuming a monthly Revithoussa booking as the supply source — of €7.98/MWh, Argus calculates. This number has been corroborated by several other regional traders. The Ukrainian transmission system operator (TSO) gave an approximate figure of €7.80/MWh, but it is unclear which regasification figures they used.
The operators along Route 1 had noted in their joint press releases on Wednesday that "due to the limited time until the auction, in case that significant amount of the offered capacity remains unbooked, the TSOs consider running another auction for the rest of the month at a time that will be jointly announced". This could suggest that the TSOs might hold another auction later today or Friday, but at the time of writing there was no new auction publicly visible on the RBP platform.
In response to the failure of today's auction, several traders pointed towards the restrictive nature of some of the product's rules, such as requiring bidders to have licences to access all five transmission systems along the route, a stipulation which drastically reduces the pool of eligible companies. Additionally, by not allowing entry nominations at Kulata/Sidirokastro or nominations from the Greek virtual trading point to count towards the Route 1 exports, this effectively favours LNG importers above any other firms.
And industry association Energy Traders Europe has raised serious concerns over the compliance of the Route 1 product with EU law, suggesting that the regulatory risk probably reduced interest in the auction. Finally, several traders noted a lack of Greek trading liquidity for June, with temperatures expected to rise and Turkish Stream maintenance on 10-16 June set to squeeze available supply. This means that the currently-significant Greek discount to markets further north is unlikely to remain in the coming weeks. Considering how expensive the Route 1 cost is, only minor Greek wholesale price discounts to Slovakia would make it uneconomical compared with simply exporting to Ukraine from Slovakia at Budince.
