CME Group to launch PPEC delivered natural gas futures

CME Group, a diverse derivatives marketplace, introduced three new natural gas futures contracts physically delivered at Pine Prairie Energy Center (PPEC), owned by PAA Natural Gas Storage.

The exchange has said that the contracts will be traded on the NYMEX floor, electronically through CME Globex and available for clearing services through CME ClearPort.

The contracts scheduled to be listed on 6 February 2011 for trading on 7 February 2011, subject to the rules and regulations of NYMEX.

The three PPEC futures contracts to be listed include: PPEC Physically Delivered Natural Gas Daily/Weekend Futures (PPD), PPEC Physically Delivered Natural Gas BALMO Futures (PPB) and PPEC Physically Delivered Natural Gas Monthly Futures (PPM).

CME said that the PPEC delivered natural gas futures contracts are an extension of its natural gas benchmark product offering by providing customers shorter-term contracts including: daily, balance-of-month and monthly contracts all with backstopped delivery.

PPEC has received Federal Energy Regulatory Commission (FERC) approval to make modifications to the PPEC Gas Tariff allowing for new services to accommodate these contracts.

CME Group managing director, Energy & Metals Products Joe Raia said that the new Pine Prairie Energy Center delivered natural gas contracts were developed to meet the fast-moving, short-term and long-term base load needs in today’s natural gas marketplace.

PNG VP-Optimization Todd Brown said we believe the combination of CME Group’s resources with PPEC’s operational capabilities will provide natural gas industry participants with a recognized, flexible and scalable physical balancing location.

“These new contracts fill an important need and should attract additional participants and increase an already healthy level of hub services volume at Pine Prairie. The increased liquidity should benefit new and existing customers,” Brown said.

These contracts provide the dual benefit of termination through backstopped physical delivery and security of an exchange-cleared transaction.

The physical delivery point for these contracts will be the PPEC, a storage facility located in Louisiana. PPEC is strategically located 50 miles from Henry Hub and has nine interconnects to eight major pipelines that service the Gulf Coast, Midwest, Northeast and Southeast markets.

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