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NEL natural gas pipeline flows remain low despite capacity boost

05 Nov 2013 14:00:40 | esgm

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Despite reaching its full potential capacity of 20 billion cubic metres (bcm)/year on 1 November, utilisation of Nord Stream link NEL has been just 18% from 1 to 4 of November, recent transmission system operator data shows.

NEL Gastransport confirmed on Tuesday that the pipeline’s capacity has gone up to 20bcm/year, up from 4bcm/year, as planned, adding that shippers have not yet started to increase their nominations.

Also from 1 November, Gazprom’s ship-or-pay volume went back to the German-Russian Nord Stream pipeline’s full capacity of 55bcm/year, up from the previously reduced volume of 40bcm/year. The ship-or-pay deal means that Gazprom agrees to pay for contracted transportation capacity, even if it does not use it.

The decision to lower the ship-or-pay volumes was made last November when it became clear that completion of the onshore NEL pipeline running east to west across Germany would be delayed until the end of 2013. Gazprom said the lower ship-or-pay volumes will apply until the full commissioning of the NEL pipeline.

Participants therefore expected more Nord Stream gas to arrive in Germany from this month on. According to NEL and OPAL data, this has indeed been the case so far, but it was due to an increase in flows through the second Nord Stream link OPAL, which runs from the north of Germany to the south at the Czech border.

While in October, an average of 668GWh/day (62 million cubic metres (mcm)/day) was transported through Nord Stream, this rate jumped up to an average of 825GWh/day (77mcm/day) in the first days of November. The vast majority of this gas continued to be transported south via OPAL instead of using the new NEL capacity aimed at supplying countries in the west such as the Netherlands, Belgium, Denmark, France and Britain.

Participants polled by ICIS expect this picture to remain unchanged until Europe sees a jump in demand because of chiller temperatures. “It is still way too warm for there to be substantial demand. If Gazprom was to send more gas to western Europe right now, all it would do is send prices tumbling,” one trader commented.

According to ICIS data, NCG and GASPOOL Day-ahead contracts are currently trading at relatively low levels compared with earlier in the year. NCG Day-ahead dropped to the lowest level of the year on 31 October, to €25.125/MWh, after trading at unusually high levels during the entire summer season just gone.

“Once we see a proper cold spell and Day-ahead goes to reasonable levels again, I am sure Gazprom will start using the new capacity,” another participant added.

This is not expected for the next few days with Weather Services International still predicting temperatures above the norm for most parts of Europe. Johanna Blackader

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