Reporting under Table 2 & Table 1 of non-standard contracts that are LNG transactions
Examples of Table 2 non-standard contracts provided in ANNEX II
None of the examples provided in ANNEX II are LNG transactions and executions under such transactions. Could ACER develop and provide some examples in the TRUM?
For a fixed price purchase of physical LNG at a specific delivery point, the final quantity unloaded off a ship and paid for is unlikely to be the same quantity agreed on at the contractual stage due to factors such as boil off, regasification and other line losses. Therefore whilst a specific quantity is agreed upfront, the final delivery quantity that is paid for will be different.
Therefore due to the change in quantity (which is unknown but expected), is the trade reportable:
- Initially as a non-standard under Table 2 (based on the contracted volume) and then reported as an Execution under Table 1 after being invoiced (based on the final volume)?
Or reported as a standard trade under Table 1 (based on the contracted volume) and then re-reported as a lifecycle modification event when the final delivery quantity is known (if there are any changes)?
We enter into a deal to purchase 3m MMBtu of LNG for USD 7 at a LNG delivery point in X EU country. Upon delivery, the final amount discharged from the ship and invoiced for is 2.95m MMBtu at USD 7.
Our interpretation is that such trades should be reported under Table 1 as at the time of transaction, the intention of both counterparties is deliver a fixed volume at a fixed price. Any changes between the contractual volume and the final delivery volume should be reported as a lifecycle modification as there is no intent from the counterparties to delivery an amount different to that contracted, but is more a result of the nature of the product being traded.
The reporting of contracts for the supply of liquefied natural gas (LNG) should not be different than any other contract for the supply of natural gas. The interpretation presented above seems reasonable. The only difference between a contract for the supply of natural gas at a balancing area and the contract for the supply of liquefied natural gas at the LNG terminal is the reporting of the delivery point. While market participants have to use EIC Y code for reporting the delivery of natural gas at balancing areas, EIC W code should be used when the delivery is in the LNG terminals.
With regard to Table 1 and Table 2, the Agency understands that most of the contracts for the delivery of liquefied natural gas at EU LNG terminals are non-standard contracts (unless they are admitted to trade at an organised market place) and are reportable with Table 2 if the contract does not have a defined quantity and price and the execution under the framework of those contracts have to be reported with Table 1. If the non-standard contact has a defined (fixed) price and quantity, it should be reported under Table 1.
The same applies for any other contracts for the supply of natural gas in the EU. Please see Annex II to the TRUM for additional guidance and reporting examples.
In addition, if two parties enter into a contract for the supply of liquefied natural gas with the optionality to deliver the commodity at more than one EU LNG terminal or/and other terminals outside the EU, market participant shall report all the EIC W codes for the EU LNG terminals included in the contract. Once the delivery of the commodity takes place, and the delivery point is known along with the price and quantity, market participants should report the execution under the framework of the non-standard contract on a T+1 month basis.
For a fixed price purchase of physical liquefied natural gas at a specific delivery point when the final quantity unloaded off a ship and paid for is unlikely to be the same quantity agreed on at the contractual stage, due to several factors including those mentioned above, the Agency agrees with the interpretation provided above. These contracts should be reported under Table 1 as at the time of the transaction, the intention of both counterparties is to deliver a fixed volume at a fixed price. Any changes between the contractual volume and the final delivery volume should be reported as a lifecycle event with Action type “M” for Modify, as there is no intent from the counterparties to delivery an amount different to what was originally in the contract. The change in the delivery volume is rather a result of the nature of the product being traded.