Detailed Glossary of Energy Trading terms

A term principally used in oil and gas context - covering the search for new reserves, exploratory activities, construction of new extraction facilities, and the running of those facilities

Detail

The gas and oil industries are generally divided into three main sectors - roughly following the life cycle of the commodity

Upstream activities follow a sequence:

• Search - actually locating new sources of oil and gas
• Exploration - the test drilling of wells or testing of other extraction methods on a potential source
• Construction of production facilities for the extraction
• Operation of those production facilities to "produce" oil and gas

See also midstream and downstream

Something that behaves like something else but is not really that thing

Detail

We've all heard of virtual reality - it appears (or tries to appear) real but is not, but it does have many of the characteristics of real

So what does that mean for us?

Well let's take a real(!) example

Virtual Storage - Storage allows organizations to inject gas at one point in time and withdraw it later

An organization (the seller) may sell another organization (the buyer) virtual storage

the buyer of the product sells gas at no cost to the seller

at some point later in time the buyer of the product requests the seller of the product to sell the gas back at no cost

the seller tracks the level of virtual gas, and tracks this against the virtual capacity of the storage product sold

Volume is the measure of how much of something is involved in a trade

Volume = Quantity (but the term Volume is nearly always used in preference)

Hence in energy trading volume may have dimensions of energy, mass, weight or volume

Detail

Volume is one of the important attributes of a trade

Volume may be specified:

As a total for the entire trade

By day, month or some other period for the duration of the trade

Volume has units of quantity according to the commodity:

Mass (often incorrectly called weight) - often used for coal, oil and other non-gaseous commodities

e.g. metric tonne (T), kilogrammes (kg)

Volume - sometimes used for gaseous and liquid commodities

millions cubic feet (mcf), barrels (bbl), gallons

Energy - may be used for any commodity

e.g. therms, Megawatt hours (MWh)

For gas and electricity trades it is generally more convenient to trade in quantities of energy

Other energy commodities are usually measured in volumes of mass or volume since this is more practical to measure at delivery

Volume traded will directly affect the traded position of that commodity

Volume may be constant over the duration of the trade, or may vary over the different delivery periods: the delivery volumes are defined in the Schedule of the trade

Weighted Average Price (WAP) is the average price over a series of individually priced volumes

Detail

The quickest way to calculate WAP is to calculate the total value over all the individually priced volumes, sum them and then divide by the total volume

Term used to describe transferring natural gas from a storage facility into a transmission network

Detail

Withdrawn volumes are nominated in the same way as other physical gas movements

See also Storage for more details

When transmitting Electricity via Interconnector, some  of the power is lost and thats called Line Loss. For UK-FR interconnector line loss factor is 1.17%