High LNG send-out pressures French TRS-PEG Nord spread

High send-out from Marseille’s Fos LNG terminals to France’s southern grid curbed price rises at the TRS hub in the first half of October, which pressured the TRS Day-ahead contract’s premium over its PEG Nord counterpart. But a narrower spread between the TRS prompt and neighbouring hubs could act as a price disincentive for additional LNG arrivals.

Send-out from the Fos Tonkin and Fos Cavaou LNG terminals for the month of October is forecast at 720 million cubic metres (mcm), based on actual send-out and GRTgaz’s forwards nominations. If achieved, this would be the highest monthly send-out since November 2014.

Send-out from the terminals averaged 25mcm/day between 1-20 October, peaking at 35mcm/day between 18-20th.

While prices at other European hubs rocketed following the start of the new gas year and a surge in weather-driven demand, gains at the TRS were limited. The TRS Day-ahead contract increased by 14% between 1-20 October, compared to a 32% increase at PEG Nord, 34% at the Dutch TTF and 36% at the British NBP.

October’s bumper LNG send-out was driven by a spate of LNG arrivals. Eleven LNG vessels unloaded at Fos Cavaou and Fos Tonkin between 1-20 October, compared with nine during the whole of September, according to ICIS LNG Edge data. Most of these were Sonatrach or ENGIE-chartered vessels from north Africa.

Greater pipeline flows from northern to southern France helped to pressure the TRS Day-ahead’s premium over its PEG Nord counterpart. Link flows averaged 32mcm/day between 1-20 October, compared to an average of 24mcm/day in September, GRTgaz data showed.

Shippers flowed a greater volume of gas during October as a series of restrictions on the link, which had been in place for much of the summer, came to an end.

Outlook

Send-out from the Fos terminals is forecast to remain at around 32mcm/day for the remainder of this week and over the weekend, before falling to 14-18mcm/day for the rest of October, according to GRTgaz’s shipper nominations.

A lower spread between the TRS and neighbouring European hubs could make Fos a less attractive destination for LNG cargoes in the coming weeks.

“Where would you send the cargoes to at current prices? First, the UK – there are some smaller vessels going there at the moment, after hardly any LNG arrived in the past month,” a trader said.

High prices at the Spanish PVB hub also make Spain an attractive destination, according to the trader. The PVB Day-ahead contract was assessed at a premium of €3.89/MWh to the same contract at the TRS on 20 October.

Some smaller vessels have to be chartered and returned within one week, meaning Spain and France are attractive destinations for north African cargoes.

The uncertain power supply situation in France has supported prices in Spain, by increasing Spanish gas-fired power generation and prompting Spain to export more electricity to France. But upside for Spanish gas prices could soon be capped as cross-border power flows were nearing their physical limits.

The spread between European gas hub prices and East Asian prices is something traders will look at too to see whether it is cost-effective to deliver cargoes to France. alex.thackrah@icis.com