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Natural gas spot markets hit further highs as cold spell to continue

03 Feb 2012 19:12:48 | esgm

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Spot prices at several European traded hubs hit the highest levels ever recorded by ICIS Heren on Friday as the weather-driven surge in demand looks set to continue into next week.

Traders reported contract nominations at record highs to accommodate the demand as Day-ahead spot contracts surpassed ICIS Heren's long-term contract price assessments (see graph, page 10).

Germany's NCG Day-ahead contract closed at €32.50/MWh - the highest ever recorded by ICIS Heren, and €5.30/MWh up from Thursday. The same was the case for France's PEG Nord, which surged €5.10/MWh to a €33.40/MWh close.

Reports from central and eastern European countries on flows from Russia were mixed, with details of more normal levels reappearingon Friday.

Transparency data from transmission system operators (TSOs) suggests, however, that cross-border flows have remained steady throughout the week.

The alarm has possibly been caused by Gazprom not being able to meet rising incumbent nominations - which have rallied as temperatures plunged - rather than existing flow levelsactually decreasing.

But in some effort to meet this rising demand, the Russian major has withdrawn much more gas from storage that is already within central Europe.

Record-high gas demand was reported from France and Spain.

Below, ICIS Heren analyses the fluctuations in Russian flows across individual countries and looks at those states where demand has jumped to record highs.

European Commission

The European Commission said on Friday that volumes from Russia have decreased into several EU member states, as Russia needs the gas to meet its own soaring demand, with temperatures in Moscow plummeting to around -20e_SDgrC.

Poland, Slovakia, Austria, Hungary, Bulgaria, Romania, Greece and Italy have all been affected, the Commission said. On 2 February, gas decreased to Austria by 30%, to Italy by 24% and to Poland by 8%.

But at a press briefing on Friday, a Commission spokeswoman said the fall in flows did not yet constitute an emergency. The Gas Coordination Group - consisting of national authorities, industry, consumer representatives and TSOs - is expected to engage in an information gathering exercise, however.

The Commission provided some reassurance on supply flexibility, saying that newly introduced measures such as cross-border reverse flow pipelines, and adequate storage levels, would help matters in the immediate term.

But it declined to comment on whether Gazprom was going against its recent statement suggesting it would meet its contractual obligations. Rather, the Commission spokeswoman indicated Gazprom's contracts did allow for some degree of interruption. As for the Ukraine, it has apparently been acting "positively" in alleviating energy security fears, the Commission said.

Storage

Gas withdrawals continued apace in storage facilities across Europe into Friday.

The largest withdrawals were again recorded at central European hubs.

A further 215 million cubic metres (Mm³) was withdrawn from German storage sites on Thursday. Fullness in Germany has now dropped by six percentage points from Monday, to just 67.5%. Nominations from German sites were at 121Mm³ on the same day in 2011, according to GSE.

At the Baumgarten hub, withdrawals ramped up even further, with 111Mm³ taken from storage on Thursday - the largest daily withdrawal from the hub since 1 February 2011.

In France, 137Mm³ was withdrawn, the largest single volume since GSE first supplied daily storage data, in late 2009. French facilities, at 53.9% fullness, are now the emptiest in Europe.

France

France hit a consumption record on Thursday. TSO GRTgaz total consumption of 293.4Mm³ on the gas network - the previous high was 282.15Mm³ on 8 January 2010 - and forecast gas-fired power plant consumption to hit a record of 17.18Mm³.

TSO data on Friday, however, showed that total consumption in the French area operated by GRTgaz was actually higher than expected, reaching a peak of 300.16Mm³.

GRTgaz' forecasts for Friday's consumption were slightly lower, while shippers predicted even higher volumes.

Some 292.14Mm³ was forecast by GRTgaz while shippers foresaw a consumption of 296.3Mm³.

Italy

Despite the lack of 26.5Mm³ from Russia flowing into the country on Thursday, the system was still comfortable enough to cope with the missing supply from Russia. According to TSO Snam Rete Gas, the total demand in the country on Thursday was 391.4Mm³, compared with 398.7Mm³ the day before.

Imports from Russia flowing through the Trans Austria Gasleitung pipeline were expected to total 76.2Mm³ against the 107Mm³ expected on Friday - for the gas day ending at 06:00 Italian time on Saturday.

Spain

In Spain, gas TSO Enagás said that conventional demand (excluding power generation) on Thursday reached a record high of 1.208TWh, 2.4% higher than the previous record, which was set on 24 January 2011.

Enagás said demand forecasts indicated a new record would again be set on Friday. Spanish state forecasting body AEMET is continuing to predict sub-zero temperatures across much of Spain for the coming days, including the main areas of domestic natural gas consumption.

Thursday's "peak in demand was coped with comfortably, with the system meeting all domestic demand as well as all export obligations", Enagás said, adding that demand from the electricity sector had been actually fallen, owing to an abundance ofwind generation.

Poland

Polish incumbent PGNiG and TSO GAZ-SYSTEM both said on Friday that imports into the country had returned to nominated levels, following a 7% dip earlier in the week.

With the approval of the economy ministry to utilise strategic reserves on Thursday, PGNiG said it is now able to cover demand which on Friday was predicted to surpass 70Mm³/day.

PGNiG warned, however, that it was not discounting some further reduction in flows from the east in the next few days, because of the extremely low temperatures.

Czech Republic

The Czech Republic on Friday registered the same "slight" decrease in gas flows from Russia as during the previous day, incumbent supplier RWE Transgas said.

"The decline did not cause us any major problems. We have a lot of gas in storage and can flow gas from German via the Opal pipeline," a spokesman said. He also said RWE Transgas is in daily contact with Gazprom concerning nominations for the following day.

Slovakia

Slovak incumbent Slovenský plynárenský priemysel, (SPP) registered an approximate 36% decline in Russian flows on Friday.

The company, however, said it could compensate for the missing flows by withdrawing gas from storage, and cover all its customers' needs without restrictions. SPP added that even in normal weather on an average day SPP uses imported gas to cover 60% of its demand with the remaining 40% coming from store. Currently, storage withdrawals are more than double the average.

Hungary

In Hungary, conflicting reports have emerged regarding incoming gas flows. National TSO FGSZ has insisted that gas supplies are uninterrupted and all contractual obligations have been met.

The country's storage operator, E.ON Földgáz Storage has reported a large increase in daily withdrawn nominations from its storage sites. On Thursday, 24Mm³ was withdrawn from storage, compared with nominations of just 7Mm³ on 23 January. The company also stressed that it has ample volumes of stored gas, even if bothfactors persist.

Slovakia

Slovak incumbent supplier SPP reported a 36% drop in volumes through its border with Ukraine at Veľké Kapušany on Thursday.

The company said on Friday that limitation of supply, brought about by the drop in Russian flows, currently does pose a threat to its customers.

TSO Eustream confirmed that just 120Mm³ of gas was distributed on Thursday. Comparatively, the TSO registered flows 225Mm³ on 20 January and 215Mm³ on25 January.

But the TSO was unable to confirm that the reduction in flows was a direct result of Gazprom's reduced exports.

Serbia

The head of Serbia's gas incumbent, Srbijagas, has said that domestic reserves are adequate to cover any shortfall in Russian gas imports.

Dusan Bajatovic, Srbijagas director general, has said that any decrease in Russian flows will not affect security of supply to the Balkan country. The country's newly opened gas storage facility at Banatski Dvor will supply 4Mm³/day and stored gas in Hungary can be called upon in the event of a deficit.

Russia has agreed to maintain supplies of at least 8Mm³/day to Serbia

Latvia

Latvia remains unaffected by the drop Russian exports, a spokesman from incumbent Latvijas Gāze confirmed. The country is not reliant on Russian imports of gas due to low domestic consumption. It holds about 2.2Gm³ of gas in store, some of which it supplies to neighbouring Estonia. This is adequate to cover gas requirements in both countries, according to the spokesman.

Bulgaria

Supplies from Gazprom to the Balkans from have been cut by around 30% since Thursday, Kiril Temelkov, executive director of Bulgaria's Bulgartransgaz told ICIS Heren.

"For now gas demand in Bulgaria is secured as there is enough gas storage. We are going to keep our contractual obligations. However, we are asking clients with alternative ways of supplying gas to do so," Temelkov said. He added that Gazprom promised to restore flows as soon as possible.

The Bulgarian energy ministry has also set up an operational group with representatives of Bulgartransgaz and Bulgargaz which will be monitoring the supply and will make sure that transit and internal gas flows are not interrupted. ICIS Heren All Staff

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