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Interview: MIBGAS aims to move to single LNG market zone mid-2020

London — Spanish natural gas exchange MIBGAS plans to become the venue for Spanish virtual consolidated LNG trade in first half of 2020, once legislation is available, the company's president Raul Yunta Huete told S&P Global Platts in an interview.

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"In the near future, we'll have a new regulation on LNG that is now being developed by the regulator, the CMNC, in which there will be a kind of a PVB or virtual trading point, but for LNG," Yunta Huete said. "There are currently six LNG terminals. There will be an opportunity to trade LNG without knowing exactly where this gas is located." "The expected time is at the beginning of 2020. It's complex and [Spanish grid operator] Enagas will need some extra time in order to make its IT systems work," he said.

LIQUIDITY, NEW PRODUCTS

The liquidity of MIBGAS has been growing steadily, reaching 35.8 TWh in 2019 to date for spot and prompt products launched in December 2015. Liquidity for future products - launched in April 2018 - climbed to 5.9 TWh.

"Our main target is to increase liquidity to at least the same degree as other European hubs," Yunta Huete said. "We have lower figures, but we are on a good path. We also concentrate almost of all the liquidity on the Spanish gas market."

"The problem is we have not been as successful with the LNG, honestly. We started it recently and we want to push it as much as possible," he said.

MIBGAS currently offers two products for LNG: within-day and day-ahead: "It's very little, but that's how we are entering the market. Also, we offer those products for every LNG regasification plant. You can negotiate LNG within-day or day-ahead at the Barcelona LNG regasification plant, or Bilbao, or at any of the six plants we have in Spain."

If MIBGAS succeeds in short-term LNG products, the company would stand a better chance for negotiation of other futures products, Yunta Huete said.

"We are a small company and we wanted to start in a not very risky way," he said. "We didn't want to develop the whole curve all in one go. We want to do it very cautiously and this is why we want to have a certain success on a short-term basis."

TRANSPARENCY, OUTLOOK

The MIBGAS president expects the upcoming single LNG market to attract more participants, as well as to contribute to price transparency: "I hope we'll have more success in new entrants and in interest in using, as well in making a change to LNG transactions," he said. "LNG is a very dark market in terms of prices... this would be our way of revealing real exchange prices for LNG." "This is something new, because you don't have to make some kind of index, that is fine, but it is the result of reporting. Instead, here you will have real prices of certain LNG transactions," Yunta Huete said.

The upcoming IMO 2020 regulation, a sulfur cap on marine fuel oil, is likely to contribute to the development of the Spanish LNG market. "Some of the ferries that are working in Spain are changing their engines to LNG. So, we will have more actors and more agents in the market," he said.

The ratio in the Spanish market is changing, potentially allowing the country to export natural gas to its European counterparts in the future, according to Yunta Huete.

"These days, we will have around 70% of LNG coming from the outside and around 30% coming from the gas pipelines; LNG is replacing natural pipeline gas," he said. "It will depend on prices, but if you have the possibility of accessing LNG ports and prices are very attractive then more cargoes will come, why not? Perhaps, we will be able to give some of the gas to the rest of Europe."

-- Kira Savcenko, kira.savcenko@spglobal.com

-- Desmond Wong, desmond.wong@spglobal.com

-- Edited by Jonathan Fox, newsdesk@spglobal.com