Germany's gas market

The way has been paved for competition on the gas market: integration of the north-west European markets, discrimination-free grid access and short-term delivery contracts at wholesale level. This is putting a question mark over the current business model pursued by established gas suppliers.

In the past, high import margins provided the incentive for competition with new market players. Today, competition is primarily based on the spread between OTC-indexed and oil-indexed gas prices.

Another new aspect is the active role of many established gas suppliers who are adapting their business model and taking up the challenges being posed by competition, regulation and climate protection. Losses in margins and volumes on domestic markets along with growing losses from grid operations are to be compensated by trans-regional sales and structured gas procurement.

Market-based price formation in different end customer segments is increasingly being questioned. With the fulfilment of all contracts at the virtual trading place, the new market order is ultimately forcing end customer markets to converge. No gas supplier will offer prices on a long term basis that are significantly below the market price.

As transparency and liquidity on the trading markets increase, margin-winning added value will shift to the still ogliopolistic areas of the gas sector: extraction and operation of storage facilities. That's why there is also a growing number of new market players operating at these added-value levels.