The supervisory board of Energinet.dk, the operator of the Danish electricity and gas transmission infrastructure, has approved the company's previously announced plans to set up a Danish natural gas exchange in co-operation with the Nordic power exchange, Nord Pool Spot. The gas exchange is expected to open during 2008.
The wholesale exchange for natural gas is intended to create better and more transparent competition in the Danish natural gas market. However, Energinet.dk said that, in the long run, its aim is to establish a joint Danish-German gas exchange.
The operator expects the gas exchange to reduce the barriers to market entry and therefore result in more independent players and transparent gas prices. In turn, this will boost competition and have a positive effect on gas market liquidity. Ultimately, a gas exchange will enhance the economic utilization of gas resources, Energinet.dk commented.
The operator said that the precondition for making the gas exchange work is that there are customers who want to trade on the exchange, as well as one or several so-called market makers, that have committed themselves to quoting purchase and selling prices on the exchange.
Energinet.dk said that it is currently in talks with market players that could potentially act as market makers. Over the coming months, the operator will arrange more than 30 meetings about the gas exchange in co-operation with Nord Pool Spot. Energinet.dk said that, so far, reactions have been positive, with players welcoming the possibility of market liberalization and transparent prices.
Energinet.dk and Nord Pool Spot will hold 50% of the gas exchange each. Energinet.dk is already a co-owner of Nord Pool Spot in Oslo, Norway, which operates the Nordic power exchange. Energinet.dk said that the new exchange will probably be based in Fredericia, Denmark, where Nord Pool Spot has its Danish office.