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IUK natural gas flows set to flip as Dunkirk maintenance ends

23 Oct 2013 10:59:39 | esgm

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The completion last Friday of maintenance at the Dunkirk entry point for Norwegian gas flowing into France could pave the way for flows through the IUK Interconnector to reverse into the direction of Britain, sources have said.

A rise in flows into France from Germany and Belgium offset the impact of the maintenance work during October.

The extra demand provided support to the Zeebrugge outright Day-ahead price over the period, keeping the basis to the equivalent NBP product relatively narrow.

Additionally, the restricted flows into France allowed for more Norwegian gas to flow into Britain during the period, which saw the British Day-ahead contract trade even closer to parity to the Belgian equivalent.

But now the maintenance has ended some sources expect the spread between the two contracts to open out, with the NBP product holding a premium, a price signal that could result in Britain importing gas from Belgium.

Franpipe maintenance

Firm interruptible capacity restrictions on the Franpipe reached 75% between 9 and 11 October, and again between 15 and 17 October.

In both instances, the maintenance led to a sharp drop in flows from Norway into France, but an increase in imports from Germany and Belgium.

Between 17 and 19 October, flows into France through the Taisnieres H entry point – which links France to Belgium – averaged 37 million cubic metres (mcm)/day, compared with an average of 29mcm/day in the three days previous.

Similarly, at the Obergailbach entry point – which connects France to Germany – flows into France averaged 47mcm/day between 15 and 17 October, compared with an average of 35mcm/day in the three days before the Franpipe maintenance.

Norway flows

“A lot of the Norwegian gas that would have flowed into France came to Britain instead during the Franpipe maintenance,” said one trader.

“This helped keep the basis narrow, as the NBP was more comfortably supplied relative to the continent than it otherwise would have been,” he added.

Between 15 and 17 October, flows through the Langeled pipeline averaged 52mcm/day, compared with an average of just 37mcm/day since the Franpipe came back on line.

The Day-ahead basis has reflected this drop in flows. After closing at an average of just -0.633p/th at trading-session closes over the six days that the Franpipe was hampered by maintenance, the basis widened to -1.45p/th on Monday 21 October.

“On top of the Dunkirk maintenance ending, it’s also worth considering that the UK has had above average [temperatures] through most of October. As we converge to colder, normal seasonal temperatures, it is likely that the interconnector will flip [to flow gas to Britain],” said a trader.

Last year, Interconnector started flowing gas consistently in the direction of Britain on 10 October.

It is generally considered that a Day-ahead basis of -1.6p/th is necessary to encourage Britain to get export gas, given the high system entry charges at the NBP.

Now that France is taking much of the available gas that the UK had benefited from in October, it is likely that a Day-ahead basis of at least level will be present in the coming weeks, which could see the Interconnector flip. Jack Elliott

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