Greenstream flows suspended but traders remain calm

Source: Heren

2011/02/22

Flows of gas from Libya into Italy were suspended on Tuesday afternoon amid conflicting reports about whether supplies from the Greenstream pipeline would be cut off completely or just reduced.

"Following the temporary suspension of some gas activities in Libya, supplies of natural gas from Libya through the Greenstream pipeline have been suspended," pipeline operator Eni said in a statement. "However, Eni is still able to meet its customers' demand for gas."

Greenstream has a capacity of 11 billion cubic metres (Gm³)/year and provides more than 10% of Italian gas imports.

Rumours started circulating earlier in the day on Tuesday that the link would be interrupted. The Italian government and EU, however, continued to assure the market the country's gas supplies were not at risk.

Flows from Libya into Italy were interrupted on Tuesday due to the Libyan protests, but the Italian government and market participants agreed that a shutdown of the Greenstream pipeline did not pose immediate threats to Italian gas supplies.

"The pipeline is not working at full capacity, that's for certain, but it is not completely closed," a spokeswoman said prior to Eni's announcement. "The situation is absolutely under control and is being monitored."

Italy is ready to use gas stocks if the pipeline is closed, the Italian ministry of economic development (Mse) added. Italian stocks were 76.77% full on Monday, compared with 22.83% in France, 30.57% in Britain and 61.30% in the Netherlands.

Another Transitgas?

Despite the conflicting reports, traders said on Tuesday that any disruption on the pipeline was unlikely to trigger a surge in spot prices as seen last year when the Swiss-Italian Transitgas pipeline was unexpectedly closed (see ESGM 27 July 2010).

"It will have an effect, the same way that Transitgas had an effect, but I don't think that effect will be very big and I don't think it should last very long," one trader said.

A trader who has capacity on Greenstream added: "In these days we're balanced and we have prepared for the possibility that it might close, so I'm not too worried."

Transitgas has a capacity of 8Gm³/year, compared with Greenstream's 11Gm³/year. Whereas Transitgas is the prime supplier for smaller operators who can get third party access, however, only four companies have capacity on Greenstream.

The Libyan link provided about 9.4Gm³ of gas, or 12.5% of Italian imports, in 2010 and 9.2Gm³, or 13.2% of imports, in 2009. Transitgas, instead, supplied 7.8Gm³ in 2010, when it was shutdown for six months, and 12Gm³ in 2009.

Volumes on Greenstream have declined this year compared with the first two months of last year, according to data from Italian grid operator Snam Rete Gas.

Flows on Sunday amounted to 25.8 million cubic metres (Mm³), according to Snam's latest data. On the same day a year earlier, they reached 32.3Gm³.

For the month of January, volumes ranged from 23.5-26.3Mm³, or 70.5-78.75% of the pipeline's capacity. In January 2010, flows ranged from 24.3-31Mm³, or 73.95-94.22% of capacity.

This decline is due to the fact that Italy is currently long on gas supplies, the trader with Greenstream capacity explained.

Immediate effects

Prices on the PSV, the Italian over-the-counter market, posted significant gains on Tuesday, with April '11, Summer '11 and Gas Year '11 all rising €0.90-1.00/MWh day on day.

This, however, was primarily attributed to the bullish oil price, which is linked to long-term gas supply contracts. March Brent crude hovered at about $106/bbl on Tuesday afternoon.

Still, questions about Greenstream also influenced Italian power prices, since the bulk of Italy's Baseload generation is gas-fired. Curve contracts such as Q3 '11, Q4 '11 and Calendar Year 2012 Baseload all climbed for the second day in a row.

"The effect on power is principally due to Brent crude, but we also need to see what happens with Libyan gas supplies," a power trader said. "We've got stocks, so a closure isn't going to affect power tomorrow or next week, but there could be an effect on the long term." SS