European L-gas stocks up 1.5bcm on 2015

European low-calorific natural gas (L-gas) stocks began the third quarter of 2016 nearly 1.5 billion cubic metres (bcm) closer to capacity than last year, according to storage operator data.

ICIS has analysed L-gas stocks at the 7bcm capacity Norg facility in the Netherlands and a number of other sites across northwest Europe, including Sediane B in France, the Epe caverns and Speicherzone facilities in Germany and the fast-cycle Zuidwending facility in the Netherlands.

Based on this data, a total of 5.8bcm was in reserve on 1 July, compared with 4.3bcm a year earlier. Norg accounted for 4bcm or 70% of the total on 1 July 2016.

Injections have accelerated rapidly throughout the summer, with the L-gas overhang increasing from 395 million cubic metres on 1 April to nearly 1.5bcm at the start of July.

A further 4.9bcm can be injected to fill L-gas storage sites in the third quarter, but only 4bcm is needed to boost stocks to the peak level that was reached in October 2015, of 9.8bcm.

A total of 6.3bcm can be produced from the Groningen field in the third quarter in adherence with the 27bcm annual cap. L-gas can also be sourced via nitrogen blending, with 4bcm of high-calorific natural gas (H-gas) converted in the third quarter of 2015.

As well as covering L-gas storage demand of up to 4.9bcm, Groningen production and H-gas conversion will also need to meet L-gas consumption in northwest Europe. In the third quarter of 2015, Dutch domestic demand and L-gas exports totalled 6.3bcm, although a proportion of Dutch exports went towards replenishing L-gas facilities in Germany and France.

This means that the L-gas fundamental picture remains balanced despite greater stocks this year and quality conversion will still be key to meeting demand for the remainder of the summer.

There is also a greater imperative to store as much L-gas as possible this year as the annual Groningen production cap will drop to 24bcm for the 2016 gas year. This could restrict L-gas production during the winter, which totalled 13bcm between October 2015 and March 2016. Winter demand for Dutch L-gas totalled 30bcm in the same period. jake.horslen@icis.com