Noncommercial Partnership

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• Non-commercial Partnership
• Gas Market Coordinator

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OBJECTIVES AND TASKS GAS MARKET COORDINATOR (1)

• Create a model for the introduction and
  development of a free gas market in the Russian
  Federation and its integration with the other
  energy sector markets and with the markets of
  partner states
• Prepare draft methodological (network code),
  normative and legislative documents (acts) for
  the establishment, development and efficient
  functioning of the gas market in the Russian
  Federation and ensure their approval by the state
  federal bodies
• Develop a strategy for the development of the gas
  transportation network
• Assist the Partnership members with the
  settlement of disputes that may arise in the
  operation and development of the gas market

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OBJECTIVES AND TASKS GAS MARKET COORDINATOR (2)

• Assist with the implementation of electricity-
  and gas-saving policy, with a more efficient gas
  consumption and, generally, making the countrys
  economy more energy-efficient
• Act as coordinator and work with the regions of
  the Russian Federation on all issues concerning
  the development of the gas market.
• The Partnership does not consider the drafting of
  its members internal documentation to be among
  its tasks.
• Its objectives do not cover the Partnerships
  members internal regulatory and organisational
  matters.

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ORGANISATIONCHART OF THE GAS MARKET COORDINATOR
General Meeting of the Partnerships Members
Co-chairmen
Supervisory Council
Board of Directors
Expert Committee
Working Groups
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COMPOSITIONPARTNERSHIP CHAMBERS

• Chamber of Buyers (Consumers)
• RAO UES of Russia
• Russian Communal Systems
• Complex Power Systems
• Severstal
• Novolipetsk Integrated Iron and Steel Works
• International Metallurgists Union Ltd
• Metalenergofinance Ltd
• Mechel Trading House Ltd
• FosAgro AG Ltd
• SPC Blagodar
• Evrochim Ltd

• Chamber of Producers
• Gazprom
• TNK-BP Management
• YUKOS Refining and Marketing Ltd
• LUKOIL Oil Company Ltd
• NP Russian Gas Society
• AK Sybur
• Under the Chamber of Producers Charter,
  decision-making is based on the principle of
  UNANIMITY thus guaranteeing equal treatment of
  all members of the Chamber.

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SUPERVISORY COUNCIL
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PARTNERSHIP CO-CHAIRMEN
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EXPERT COMMITTEE
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CONSULTATION AND DECISION-MAKING PROCEDURES ON
GAS MARKET ISSUES SET OUT IN THE GMC DOCUMENTS
SUPERVISORY COUNCIL
DECISION
Chambers Resolution
Chambers Resolution
Draft document EC Resolution
CHAMBER OF BUYERS
CHAMBER OF PRODUCERS
EXPERT COMMITTEE
DRAFT DOCUMENT
DRAFT DOCUMENT
Expert groups
Expert groups
Expert groups
Expert groups
Expert groups
Expert groups
Expert groups
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MAIN CHARACTERISTICS OF THE GAS MARKET
MODEL

• The Model represents the collective view of the
  participants of the market on the general
  principles underpinning the future structure,
  organisation and operation of the free gas market
  in Russia.
• The Model is of a general fundamental nature and
  is yet to be developed and elaborated in detail
  by the participants of the market within the
  framework of the GMCs procedures.
• If the Model is approved by the Government of the
  Russian Federation, it could serve as a basis for
  the gas sector reform, and also for solving the
  problem of the natural gas pricing within the
  context of Russias accession to the WTO.

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STRUCTURE OF THE DOMESTIC GAS MARKET (IN
PERCENTAGES)
GMC proposes an EVOLUTIONARY reform of the gas
market through the two-sector model with an
expanding free (non-regulated) sector and a
contracting regulated sector
Expected deviations
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THE GAS MARKET MODEL envisages

• A sufficiently long transitional period of
  parallel operation of the decreasing regulated
  sector and the increasing competitive sector of
  the domestic gas market (thetwo-sector model),
  giving the gas consumers an opportunity to adapt
  to the new free pricing conditions (the
  adaptation period)
• A guaranteed equal treatment of all participants
  of the free sector of the market
• An environment in which a producer or a buyer of
  a dominant position would be prevented from
  dictating the price formation process on the free
  market
• A maximum protection for the citizens of Russia
  against any negative social implications of
  rising gas prices.

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DOMESTIC OIL PRICE MOVEMENT FORECAST USD/1000
cu.m.
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CREATING AN INDEPENDENT TRADING PLATFORM

• The GMC, the Russian Gas Society and Gazprom are
  in the process of creating an independent trading
  platform the Non-commercial Partnership
  Interregional Oil and Gas Exchange (IOGE),
  which is a potential TESTING GROUND for the
  application of market mechanisms and for studying
  the prerequisites to the formation of the free
  sector of Russias gas market.
• Using the IOGE as a basis, a testing ground for
  applying the trading mechanisms to gas produced
  both by Gazprom and by the independent producers
  has been put into place. The proposed framework
  will help prevent the domination of the gas
  market by a single participant, make the market
  price of gas within the regions more transparent
  and achieve the gradual development of the
  mechanisms of the free gas market.
• The Co-chairmen of the GMC have asked the Russian
  Government to give the go-ahead to 5 billion cu.m
  of gas produced by Gazprom and an equal output by
  the independent producers to be traded on the
  IOGE at free-market prices and in a manner agreed
  with the Government.

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TRADING ON THE IOGE
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ALGORITHM OF THE CONTINUOUS TWO-WAY COUNTER
BIDDING OF PRICE APPLICATIONS

• THE OBJECTIVE OF SELLERS AND BUYERS TRADING ON
  THE IOGE is maximum profit for the individual
  sellers and minumum costs for the individual
  buyers
• The existence of waiting bids from both sellers
  and buyers allows for real-time pricing (the
  price is determined in the course of the
  transaction) throughout a trading session. For
  trading on the Exchange that means from the
  moment the Exchange opens to the moment it closes
  on the days when it operates.

Chart.1. Waiting bids IOGE                    
 
 
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ALGORITHM OF THE TRADING POOL OF PRICE
APPLICATIONS

• Chart.2. Balancing demand and supply through the
  POOL model

• The objective of the Pool is to maximise the
  collective benefit for all participants in the
  trading
• The Pool can achieve the following
• minimize the total public loss when product
  purchases
• maximize the profit for the most efficient
  product suppliers
• deliver the product to those purchasers who need
  it most (ie who are prepared to pay the maximum
  price for it) and
• Determine the optimum utilisation of a product
  line (equivalent price-locking orders) at a
  particular moment in time. 

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NONCOMMERCIAL PARTNERSHIPGAS MARKET
COORDINATOR

• THANK YOU FOR YOUR ATTENTION