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26 June 2008
Not many belly laughs as our elected representatives make determined bids to find out what is happening in the energy market. Last week MPs on the Commons Business and Enterprise Select Committee had a frustrating time trying to find out what a clutch of big-time gas producers thought was going on.
Representatives from BP, Shell and ExxonMobil talked about oil indexation, liquidity and transparent market pricing but it wasn't clear at the end of the session whether the committee members were really any the wiser.
The most jaw-dropping moment came when Richard Guerrant from ExxonMobil volunteered to explain what the National Balancing Point was. He burbled on in his American drawl saying things like this: "Essentially, this is all the gas that goes into the national grid system. That gas is traded on various terms but primarily on a short-term basis and I talked about the pricing of that a minute ago. If we look at the absolute volume of gas going into the grid from which UK consumers pull their gas, the buys and sells are multiples; they are nine to 14 times the physical volume that consumers like ourselves pull off the system. That system of buying and selling is what creates the liquidity and creates the highly competitive market and the transparent market pricing one has."
Our man from across the pond added: "What is very important is liquidity. If I had to haul the gas to your meter to serve you there would not be liquidity; there would not be multiple buyers. By creating this virtual point it allows all the buyers and sellers to be on the same basis. There is full liquidity and no one has an advantage."
Well, that's cleared that one up then.
Tags: ExxonMobil
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