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Dutch low-calorific natural gas exports to Germany to drop from 2021

20 Feb 2013 14:44:35 | esgm

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The German market for low-calorific natural gas (L-gas) will disappear more quickly than expected, as imports from the Netherlands will drop significantly from 2021, according to Germany's gas transmission system operators (TSOs).

In their first draft of the country's gas grid development plan (NEP) 2013 (see ESGM 19 February 2013), the companies said they have recently been advised by Dutch TSO Gasunie Transport Services (GTS) that the Netherlands' export expectations have been revised downwards. According to GTS, Dutch L-gas exports to Germany will start to drop from 2021, and they will stop completely in 2030.

In last year's NEP, the German TSOs still said they expected stable L-gas imports from the Netherlands until at least 2022.

Currently, imports from the Netherlands through the Oude Statenzijl, Zevenaar and Winterswijk border points cover more than 60% of Germany's L-gas consumption, according to the grid operators.

Meanwhile, domestic L-gas production is also constantly dropping. According to figures from German oil and gas producers' association WEG, it is expected to drop by more than 50% by 2021, down from 11.4mcm produced in 2012.

In order to cope with the new situation, the German TSOs said they need to start switching the infrastructure to the more common high-calorific gas (H-gas) from 2018.

In the NCG area, this affects the Open Grid Europe (OGE) and Thyssengas networks - as well as Nowega, Gasunie Deutschland Transport Services (GUD) and GTG Nord in the GASPOOL zone.

Historically, the L-gas network - which is located in the northwest of the country - was built around the natural reserves in Germany and in the Dutch Groningen field.

Grid upgrades

In their draft for the NEP 2013, the TSOs said they have to make significant investments in the existing infrastructure in order to be able to supply the current L-gas customers with H-gas in the future.

"The most important thing at the moment is to prepare our grids for the phase-out of the L-gas production of the Netherlands," OGE chairman Stephan Kamphues told ICIS at the E-World conference in Essen earlier this month (see ESGM 12 February 2013).

"This will have a huge impact on our network because the German grid does not provide the opportunity to bring H-gas into the L-gas areas. That's a problem we need to solve within the next seven years because the Dutch production will go away quicker than we thought."

Conversion fee

Although both German trading zones are officially set up as cross-quality market areas, many participants consider H-gas and L-gas to be separated in reality.

Since the market zones mergers in 2011, which integrated the L-gas areas into the H-gas trading zones, both German hubs have been charging a significant fee for the conversion between gas qualities, which stands in the way of cross-quality trading.

Most recently, the NCG announced that it will lower its conversion charge to about one-third of the equivalent GASPOOL charge from 1 April (see ESGM 15 February 2013). While the NCG fee will drop to €0.60/MWh from this date, down from €0.70/MWh, the GASPOOL charge will remain at €1.76/MWh.

The NCG's reduced fees will mean that if the NCG L-gas premium exceeds the €0.60/MWh mark at times of high demand, then market participants will start buying H-gas instead and use the conversion service.

Traders polled by ICIS welcome the reduction, but said that it will have a limited impact on trading. According to the dealers, a level of €0.30-0.40/MWh would be more reasonable.

The GASPOOL hub will have to lower its conversion fee by at least €0.44/MWh by 30 September 2013, according to a ruling by the German regulator, the Federal Network Agency (BNetzA). The current €1.76/MWh charge will have to drop to €1.32/MWh or less from this date. For each hub, the BNetzA has set a maximum yearly fee from 2012 until October 2016, at which point the conversion fee will drop to zero. Johanna Blackader

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