Overview
In LNG capacity auctions, some LSOs (LNG Operators) may use the ascending clock algorithm to allocate capacity. These LSOs are Deutsche Energy Terminal (short-term only), Deutsche Regas, TotalEnergies LNG Services France, Fosmax LNG and Elengy.
Remember that, to be able to participate in the LNG capacity auctions on the PRISMA platform, you will first need to:
1. Register your shipper company on PRISMA.
2. Request an assignment to the operator in whose auctions you wish to participate and have the assignment approved by the operator.
Note: The Ascending-Clock Algorithm for LNG capacity auctions differs from the Ascending Clock Algorithm used in transport capacity auctions.
General Rules
a. In ascending clock algorithm auctions, a given amount of capacity, number of main service packages (MSP) or slots is offered with predefined price steps.
b. A bid can be placed for a certain MSP or number of slots at a given price.
c. All auctions start at the starting price (SP) in the first bidding round.
d. If there is overdemand, additional price steps (surcharges) are applied in the following bidding rounds.
e. There are three possible auction outcomes: (I) Undersell in the First Round; (II) Clearance in Any Round; (III) Undersell in a Price Step Round.
f. The last outcome may vary depending on following configurations: (1) No Pay-as-Bid Round, No Leftover Allocation; (2) No Pay-as-Bid Round, With Leftover Allocation; (3) Pay-as-Bid Round, No Leftover Allocation; (4) Pay-as-Bid Round, Leftover Allocation.
Case Studies
I. Undersell in the First Bidding Round
If the total demand for slots is below the available slots, or MSPs, then the auction closes and the capacity is allocated for the starting price.
II. Clearance
In any round, if the total demand for slots, or MSPs, is equal to the available amount of slots, or MSPs, then the auction closes and capacity is allocated for the starting price plus the number of price steps that were added with each round.
Take for instance this example:
A. Round 1
B. Round 2
III. Undersell in a Price Step Round
If the total demand for slots, or MSPs, falls below the available amount of slots, or MSPs, in any price-step round - that is, any round that isn't the first -, four possible scenarios may ensue depending on the configuration of the auctions. These are: (1) No Pay-as-Bid Round, No Leftover Allocation; (2) No Pay-as-Bid Round, With Leftover Allocation; (3) Pay-as-Bid Round, No Leftover Allocation; (4) Pay-as-Bid Round, Leftover Allocation.
1. No Pay-as-Bid Round, No Leftover Allocation
If the auction is configured with no final pay-as-bid round and no leftover allocation, the auction will end when the total demand for capacity slots, or MSPs, is below the available number of slots, or MSPs. Moreover, if there are leftover slots, these will remain unallocated.
Take this case as an example:
A. Round 1
B. Round 2
C. Round 3 - Final Round
2. No Pay-as-Bid Round, With Leftover Allocation
If the auction is configured without a final pay-as-bid round but with leftover allocation, then the auction will end once the total demand for capacity slots, or MSPs, falls below the available amount of slots, or MSPs.
However, the leftover slots, or MSPs, will also be allocated at a different price - that is, the price of the last round in which the total demand exceeded the available supply. This allocation can occur either at random or on a first-come-first-served basis.
In the former method, each slot or MSP is considered as a lot and those lots drawn and distributed to the participating bidders. The likelihood of receiving leftover slot, or MSPs, is determined by the amount requested by the bidder in the last round with overdemand: the higher the amount requested, the higher the likelihood of receiving leftover capacity.
In the latter method, the bidder who placed their bid first in the last overdemand round gets the leftover capacity. The maximum amount of MSPs each bidder could get in either case is constrained by their request in the last round with overdemand.
A. Round 1
B. Round 2
C. Round 3
3. Pay-as-Bid Round, No Leftover Allocation
If the auction is configured with a final pay-as-bid round, but without leftover allocation, then, once the total demand for slots falls below the available amount of slots, another round will be triggered, in which the last price step will be reversed and bidders will be asked to offer a surcharge and enter a maximum and minimum number of slots they want to buy.
The minimum surcharge is set by the last round in which there was an overdemand. The bids will then be ranked from highest to lowest price and bidders will receive capacity accordingly, if there is enough to supply for their minimum request.
Note: If multiple bidders submit bids with the same price and quantity in the final pay-as-bid round, the allocation will be determined based on the timestamp of the bids. The bidders who placed their bids earliest will be given priority in the allocation.
However, should there be leftover capacity in this final round, it will remain unallocated.
A. Round 1
B. Round 2
C. Round 3
D. Final Pay-as-Bid Round
4. Pay-as-Bid Round With Leftover Allocation
If the auction is configured with a final pay-as-bid round and leftover allocation, then the same rules described in section 3 apply.
However, the leftover slots, or MSPs, will also be allocated at a different price - that is, the price of the last round in which the total demand exceeded the available supply. This allocation can occur either at random or on a first-come-first-served basis.
In the former method, each slot or MSP is considered as a lot and those lots drawn and distributed to the participating bidders. The likelihood of receiving leftover slot, or MSPs, is determined by the amount requested by the bidder in the last round with overdemand: the higher the amount requested, the higher the likelihood of receiving leftover capacity.
In the latter method, the bidder who placed their bid first in the last overdemand round gets the leftover capacity. The maximum amount of MSPs each bidder could get in either case is constrained by their request in the last round with overdemand.
A. Round 1
B. Round 2
C. Round 3
D. Final Pay-as-Bid Round
