balancing, on a day-by-day basis, the amount of gas a shipper puts into a pipeline system.

   allows a buyer of natural gas to take additional volumes on one day’s notice.

   in a buyer’s nomination contract, this is the average amount the buyer can have in its daily nominations. The maximum rate at which the buyer can ask the seller to deliver (see delivery capacity) is a function of the DCQ and the swing. A similar rule exists in a seller’s nomination contract, where it is called the estimated daily contract quantity.

   a one-day value-at-risk calculation, typically with a 95% confidence level over a 24-hour period.

   supply points/sites with meters that read natural gas volume either on a continuous or daily basis. Indicate the daily volume consumption needed for daily balancing. The sites are at large input and offtake points on a gas system, typically for large industrial gas end-users.

   term sometimes used for the paper chain formed by the passing of a 15-day Brent cargo – that is, 15 working days ahead of its loading date – from the equity holder through a sequence of deals. see also dated Brent, five o’clocking

   the spread between the fuel and power price for a generator. The term spark spread is used for gas-fired, and, similarly, dark spread is used for coal-fired generation. Like a spark spread, the measure of the fuel efficiency of the conversion process in generation.

   in risk management, trading and financial applications, a consolidated report and/or graphical display highlighting key financial results and control metrics, such as current and trending level of value-at-risk, current trading positions against established limits and daily mark-to-market gains and losses.

   a term for a physical cargo of Brent blend crude that has received its loading date range. This occurs 15 days ahead of loading (not including weekends and bank holidays). see also daisy chain, Brent blend crude oil

   the market trading for the day before the operating day.

    see daily contract quantity

   an event such as a credit rating downgrade that triggers further guarantee requirements on a loan or swap contract.

   an offshore terminal for liquefied natural gas (LNG) or energy product loading/unloading, or alternatively used to describe a seaport that can accommodate a fully loaded Panamax-class ship. For LNG operations, a deepwater port is essentially a connection to an ocean floor natural gas pipeline using a turret-loading buoy, which serves as the LNG tanker’s mooring. Deepwater ports may also be considered to be offshore structures that are used as a port or terminal for loading or unloading other energy products, such as the Louisiana Offshore Oil Port (Loop) in the US. H See also Loop

    see credit risk

   a swap under which the payments are deferred for a specified period, usually for tax or accounting reasons. Not to be confused with a forward swap, where the entire swap is delayed. see also forward swap

   a measure of the variation of one day’s temperature against a standard reference temperature, typically 65° Fahrenheit (18° Celsius). Degree days are used as a basis for temperature-related weather derivative deals. There are both cooling degree days (CDDs) and heating degree days (HDDs). For example, a firm takes out a 30-day CDD swap with a reference temperature of 65°F, and the average temperature on each day is 70°F. The company is then due 150 (30 x 5) degree days multiplied by the sum of money agreed for each degree day. If the firm had taken out an HDD swap, it would have owed the same amount of money.

   the rate at which gas can be supplied from a reservoir – such as salt cavity storage – in a given period. In a salt cavity storage facility, for example, the rate would depend on a number of factors, including reservoir pressure, reservoir rock characteristics and withdrawal facilities such as pipeline capacity. The term is also used for the volume of gas that a field, pipeline, well, storage or distribution system can supply in a single 24-hour period.

   the maximum rate at which a natural gas buyer can request the seller to deliver gas (other than excess gas) into the pipeline and which the seller has a firm obligation to deliver. In peak-supply contracts, there may be a charge payable in respect of the available delivery capacity.

   (UK) companies that operate the natural gas processing facilities at gas terminals before the gas is passed on either into storage or to the national transmission system.

   the month in which a futures contract matures and can be settled by physical delivery. Also known as the contract month.

   option risk parameter that measures the sensitivity of an option price to changes in the price of its underlying instrument.

   an option is delta hedged when a position has been taken in the underlying that matches its delta. Such a hedge is only effective instantaneously, because the option’s delta is itself altered by changes in the price of the underlying, interest rates, the option’s volatility and time to expiry. A delta hedge must thus be rebalanced continuously to be effective. see also dynamic replication

   a position for an options portfolio such that the overall delta of the portfolio is zero.

    see capacity charge

   the level of demand over a 24-hour period.

   activities carried out to control the level and type of demand for electricity.

   the cost, or the delay period resulting in the cost, charged when a vessel fails to unload or load within the allotted time period, or laytime, provided by contract. Essentially a liquidating damages charge for contract breach for detention of the ship.

   the halting or reduction of government regulations.

   a financial instrument derived from a cash market commodity, futures contract or other financial instrument. Derivatives can be traded on regulated exchange markets or over-the-counter. For example, energy futures contracts are derivatives of physical commodities, and options on futures are derivatives of futures contracts.

   a middle distillate fuel used in diesel engines.

   an option that pays the price difference between two assets. The strike price provides the initial reference point for valuing the option. A buyer’s profit or loss will depend on how the current price differential between the two assets compares with the differential when the option was launched.

   a quanto swap.

   an acronym for the Financial Accounting Standards Board’s (FASB’s) Derivatives Implementation Group, which is a task force that was created by the FASB in 1998 concurrent with their issuance of FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, to assist the FASB in providing guidance on questions that companies would face when they began implementing FAS 133.

   digital – or binary – options pay either a fixed sum or zero depending on whether the payoff condition is satisfied – e.g., cash-or-nothing options and asset-or-nothing options. see also digital swap

   the fixed leg of a digital swap is only paid on each settlement date if the underlying has fulfilled certain conditions over the period since the previous settlement date. The premium for such a swap is paid in instalments at each payment date. see also digital option

   the unidirectional flow of electric charge. High-voltage DC is a technique often used for undersea cables connecting different countries. Power transmitted in this way suffers less reactive power loss than an alternating current line. It also allows connection of two asynchronous alternating current networks.

   generation available physically or contractually to respond to changes in system demand or to respond to transmission security constraints.

   the distribution pattern of measurements. The Standard Deviation is the most common measure of dispersion.

   where natural gas is input into a pipeline system at one end and the same amount of gas is delivered at another point, although the gas may not have been transported between the two points.

   any distilled product of crude oil. A light petroleum product used for home heating and most machinery.

   oil products obtained by distillation, including gases, gasoline, naphthas, jet fuel, gasoil and waxy distillates. Atmospheric distillates boil at around 370° Celsius, and vacuum distillates at between 370° and 525°C.

   the simple refining of oil by boiling.

   a distributed generation system is characterised by a number of smaller, interlinked generators, rather than one central generator.

   1) the probability distribution of a variable describes the probability of the variable attaining a certain value. The distribution assumed by an option pricing model iscrucial to that model’s predictions, since it determines the likelihood of the option being exercised. 2) the delivery of electricity to the retail customer’s home or business from the main grid through low-voltage distribution lines. Low voltages range from 2,300 to 69,000 volts. see also transmission facility

   the daily balancing of the difference between a shipper’s gas input volume and its customers’ offtake.

   storage located close to all gas demand centres that is used to meet the daily peaks in demand. Such storage is provided in the form of gas holders and line-packing.

   in the context of energy markets, generally refers to the diversion of cargoes from the original intended destination as may be allowed under contract provisions, in order to maximise price arbitrage opportunities.

   the process of requiring monopolistic utilities to spin off one segment of their business. Done to ensure that uncompetitive advantages created by former government actions are removed, so that competition can develop. A utility with generation, transmission and distribution facilities, for example, might be forced to sell off its generation. Also known as vertical disaggregation.

   (US) Department of Energy.

   the section of the energy market that covers energy requirements for domestic premises.

   term used to indicate that a deal has been completed. For example, a broker might tell a trader that he is ‘done’, meaning his buy/sell requirements have been matched precisely.

   a swap with an embedded option that permits the writer of the swap to halve the agreed volume once, and once only, at or before an agreed date. In return, the buyer of the swap obtains a more favourable price.

   the exact reverse of double-down, with the writer of the swap having the option to double the agreed volume.

   A leading provider of global business news and information services. Among other publications, its consumer media group publishes The Wall Street Journal and Barron’s. www.dowjones.com

    see upside/downside risk

   activities in the oil and natural gas industry from a refinery onwards – e.g., the distribution and marketing of hydrocarbon products. see also upstream

   a large dock in the form of a basin, which can be flooded to float in vessels and then drained to create a dry area around the vessel. It is used for building or repairing a ship below its water line.

   gas with a low liquid content, usually below two gallons per 1,000 cubic feet. This may happen naturally, as in most of the fields in the southern North Sea, or the water content may be reduced by a dehydration process. Also known as lean gas. see also wet gas

   (UK) Department of Trade and Industry.

   where two different fuels – say, gas and oil – can be used to generate energy in one piece of equipment. see also co-firing

   a benchmark crude produced in Dubai, one of the United Arab Emirates. Dubai is commonly used as a reference price for the Asia-Pacific region.

    see delta-hedging

   replication of an option payout by buying or selling the underlying (or futures, where cheaper) in proportion to an option’s delta. Dynamic replicators are exposed to increases in volatility, which may increase the costs of the necessary hedge. see also delta-hedging, static replication