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OGE calls for more injections to avoid winter disruptions

30 Jul 2013 17:16:41 | esgm

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German transmission system operator (TSO) Open Grid Europe (OGE) has expressed serious concern over the possibility of gas supply disruptions this coming winter in a letter to market participants urging them to continue filling storage facilities.

Germany's biggest TSO warned participants that because they started injecting gas at a relatively late stage, and initially using significantly lower quantities than in preceding years, the risk of a critical supply situation in Germany, as well as in other neighbouring countries, for the 2013-14 winter season has risen.

The TSO warned that "if an extremely cold snap occurs, or if one or more supply sources are disrupted or completely suspended, as in the 2009 Ukraine crisis, the possibility of supply restrictions occurring cannot be ruled out".

It said: "Nor can the energy market offset shortfalls if no gas is available from storage facilities and if input options at border crossing points and domestic production sites are fully utilised."

A late and sustained period of low temperatures in large parts of Europe strained gas storage levels in March, leaving some European hubs depleted (see ESGM 11 April 2013).

The TSO said that while the March to October period is usually used to replenish gas storage facilities before the next winter season, injection is subject to physical constraints in the pipeline network and the facilities themselves. This means that a large proportion of the gas cannot be injected in a short time.

Ramping up

Rates of gas injection have been ramping up since the start of the month, but storage levels at European hubs such as in France and Germany are still relatively low at around 46% and 61% respectively, with one trader describing the storage situation in France as "very scary".

At the start of June, the German hub was only 31% full, compared with 61% in June 2012. Storage fullness at the British hub, although now at 70%, was only 31% full at the start of June, compared with 61% in June 2012.

However, one market participant in Austria pointed out that a combination of high rates of injection in some markets and strong flows into Europe are narrowing spreads even further.

One reason for the lag in gas injections in Germany has been a lack of favourable spreads, with prompt and near-curve prices at unusually high levels that removed any incentive for storage injection.

The combination of expensive NCG natural gas prompt and near curve contracts and extremely low German stock levels is also expected to lead to a winter season of high volatility and price spikes, according to traders polled by ICIS in May (see ESGM 28 May 2013)

Historically, tighter summer-winter spreads have also been a factor discouraging storage injection. On the TTF, the Winter '13 premium to Summer '13 remained below €2/MWh from 4 January until the front summer expired. By contrast, the spread averaged around €3/MWh in June 2012.

Czech regulator ERU is already planning to enforce a "supply security standard" from October, which will require gas suppliers catering to a certain group of protected customers to prove that they can guarantee supplies this winter.

Under that requirement, 20% of secure supply volumes will have to be provided by storage facilities. Sarah Nowakowska

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