In the first level of the “Gas, Gas Markets & Trading” programme focus is on the physicality of gas. The Basic course incorporates the essentials of the physical product (gas & gas-related products). It covers the gas value chain, and ranges from production, via transport & storage, to its processing and consumption. Gas delivery is also covered.
Knowledge of physicality is essential in order to understand pricing mechanisms, organisation of gas markets and create fundamentals for gas-related products. Without knowledge of physical features one cannot embed logic with respect to trading & risk.
The gas value chain – Physicality
- Production & consumption of natural gas in a nutshell
- About transportation & storage of gas
Gas reserves & production – Conventional & unconventional
- Conventional & unconventional reserves; Europe’s dependency
- Concerning production techniques & the shale gas revolution
Gas quality – Calorific value, Wobbe-index & quality conversion
- Concerning high calorific gas and low calorific gas
- About the quality of natural gas & the conversion of it
Gas transport – LNG, pipelines, TSOs & balancing
- About the role of TSOs and balancing regimes
- Concerning gas transport and cross-border capacity
- Re liquefied natural gas (LNG)- Liquefaction & regasification
Gas balancing – Balancing regimes, line-pack & imbalances
- Covering an example about the Dutch gas market (TTF)
- Covering causers, helpers & incentives
Gas storage – Types & reasons for allocation
- About salt caverns, aquifiers and gas field
- Concerning injection and withdrawal, working volume and cost
- Covering security of supply, balancing & seasonality
Gas hubs & gas products – Market conventions
- Concerning physical and virtual hubs, incl. NBP, TTF, NCG & HH
- Spot products – Hourly products Within day & Day ahead market
- Summer & Winter contracts – Gas day, gas year & EFA calendar
Gas contracts & pricing – Price drivers & oil-indexation
- About oil-indexed gas contracts – Arbitrage in contracting
- Concerning gas-to-gas pricing, gas-to-oil pricing and indices
- About flexibility in supply contracts – ACQ & DCQ
Exam & Certification
In the second level of the “Gas, Gas Markets & Trading” programme focus is on the trading of oil, and therewith at markets, products and pricing. In this programme special attention is provided to physical players, and therefore focus is on sourcing, sales, and hedging of the procurement and sales exposures (consumer and producers hedges). The trading environment is described and attention is given to trading-related terminology. Derivative contracts with respect to crude and refinery products are incorporated. Student learn the fundamentals of forwards & futures, swaps and options. From a hedging perspective the main focus is on oil forwards & futures.
Gas forward markets
- Covering the differences between spot & forward markets.
- About price volatility in spot & forward markets; mean reversion.
Gas exchanges & brokers
- About OTC markets and trading venues for natural gas & LNG.
- Concerning market liquidity, notional value and open interest.
Gas forwards & futures – The varieties
- Concerning the most commonly known contracts.
- The time-to-maturity and delivery moment/period.
Gas forwards & futures – The application
- Covering asset-backed trading as well as proprietary trading.
- About managing gas-related exposures.
Gas forwards curves – Pricing of gas forwards & futures
- About contango & backwardation, including seasonality.
- Covering the convenience yield.
Hedging gas production & consumption capacity
- About procurement & sales on a forward basis; contract mgt.
- Covering assuring future cash flows by price fixation.
Hedging gas storage capacity
- Locking in potential margins on a forward basis.
- Covering time spreads; what these are & how to trade these.
Hedging gas transport capacity
- Locking in potential margins on a forward basis; NG & LNG.
- Covering location spreads; what these are & how to trade these.
Settlement of gas forwards & futures – Part 1
- Including physical delivery & cash settlement.
- Covering nomination & periodic invoicing.
Settlement of gas forwards & futures – Part 2
- Concerning the process of cascading.
- Covering the consequences of it for the gas portfolio.
Exam & Certification
In the third level of the “Gas, Gas Markets & Trading” programme focus is on asset & portfolio management.
Next, some topics and themes incorporated in the Intermediate programme are also incorporated in this Advanced programme, but are now taken into depth. Optimisation of the allocation of assets is taken into consideration, and asset-backed trading is explained. That means that apart from physical trading financial trading is incorporated and focus shift more and more toward the financial side. That is also why special attention is given to arbitrage techniques and a basis is created for proprietary trading. Valuation of positions and financial accounting of portfolios is covered.
The application of gas derivatives is taken a step further; students learn what gas swaps and gas options are, and how these can be used for hedging purposes.
Accounting – Book structure & internal transfers
- About internal transactions & prices, including premiums.
- Concerning book structures, cost allocation & P/L responsibility.
- Covering upstream, midstream & downstream activities.
- About gas supply contracts; including load forecast.
- Concerning circumstances, e.g. weather, economic situation.
Physical gas assets
- About make-or-buy decisions & asset-backed trading.
- Aggregation of rights & obligations (prod., cons. & settlement).
Gas swaps – Physical settlement
- Concerning solutions for problem solving in the physical world.
- About basis swaps, or location swaps.
Gas swaps – Cash settlement
- About financially-settled agreements, including indexation.
- Concerning fixed-for floating contracts.
Gas options – Outright options
- About tradable contracts in the OTC markets & on exchange.
- Pricing of gas options; intrinsic value plus time value.
Gas options – Application for hedging purposes
- About hedging natural short/long positions with call/put options.
- About gas price caps & floors.
Gas options – Embedded optionality
- About volume flexibility & swing optionality in supply contracts.
- Covering structuring, including ACQ & DCQ.
Exam & Certification
In the fourth level of the “Gas, Gas Markets & Trading” programme focus is on optimisation of gas portfolios. This programme also goes into depth on financial trading. The consequences of speculation and paper trading are incorporated. Proprietary trading is covered as well as the working of highly sophisticated trading techniques. The complexity of some specific gas trading strategies and activities leads automatically to an increased importance of risk management. That is why risk management of gas positions is also incorporated in this programme. The organisational structure of trading entities is considered, as well as risk controls, such as checks & balances, and the ethics and integrity of the sector, companies and individuals.
Gas risk management – Value-at-risk (VaR) of a gas position
- About the a commonly applied method to quantify an exposure.
- Covering the relevant time horizon and confidence level.
Gas risk management – Risk off-set due to correlation
- About statistical data and concepts, and how to apply these.
- Concerning pairs or proxies.
Gas risk management – Value-at-risk (VaR) of a gas portfolio
- About the quantification of aggregated gas positions.
- Considering opposing long/short positions & correlated positions.
Gas risk management – Off-setting risk due to opposing exposures
- About risk off-setting and netting.
- Covering portfolio integration and cross-margining.
Modelling – The real option approach
- About production capacity, transport capacity & storage capacity.
- About management decisions, such as the right to dispatch.
Modelling – Physical gas assets as real options
- Considering gas production capacity, pipelines & gas storages.
- About call options on the spark/time/location spread.
Modelling – Complexity: Valuation & hedging of spread options
- About structuring, including exotic options.
- Including spread option valuation models, e.g. Margrabe.
Modelling – Optimizing the hedges
- About hedging strategies, e.g. proxy-hedging.
- Concerning dynamic risk management; Delta-hedging.
Exam & Certification