ICIS view: Netherlands a net importer in May as gas injections ramp up

Dutch demand for H-gas is likely to remain strong in the coming years as the market copes with reduced Groningen production – which is not expected to exceed 30 billion cubic metres (bcm)/year – and greater storage injection demand as a result of the new Bergermeer facility.

Already in 2015 and 2016, this has resulted in net imports of gas into the Netherlands during the summer months – a trend which looks set to continue.

What is less certain is the source of the gas that will be used to cover this additional Dutch demand in future.

Since February 2015, Russian-sourced gas transiting Germany and pipeline imports directly from Norway have ramped up to meet demand, but market participants see LNG playing an increasingly important role in the future.

Net H-gas exports from the Netherlands to Germany averaged more than 700mcm/month between October 2012 and March 2015, but since then the Netherlands has received an average of 134mcm/month. From Norway, average monthly receipts have increased from 1.3bcm/month to 1.5bcm/month over the same period.

There is potential for LNG deliveries to northwest Europe to start competing to satisfy this new Dutch demand however, as the global LNG market becomes increasingly saturated by new US and Australian supply.

Recent strength in the oil market – which lifts the price of Russian-sourced gas through oil-linked supply contracts – may even increase the pace at which this competition develops.

Average LNG send-out from the Rotterdam Gate terminal has been unchanged in the wake of the Groningen curbs, but the more heavily utilised terminals in Britain, Belgium and France could also be used to supply the Dutch market.

Europe has so far received just one cargo from the recently operational Sabine Pass terminal in the US Gulf, but the gradual commissioning of new liquefaction capacity in the coming years should result in increased volumes reaching European terminals.

Changing Dutch fundamentals and new LNG supply in the Atlantic may therefore result in more dynamic cross-border flows in northwest Europe and less stable price spreads between prompt and near-curve contracts at the different hubs. jake.horslen@icis.com