Forties shutdown spurs British NBP gas trading turmoil

Source: Heren


A short-lived shutdown at the North Sea’s Forties Pipeline System (FPS) lurched near-term British natural gas prices higher and then lower on Wednesday afternoon.

A feed control valve at the Kinneil gas terminal around 10:20 London time led to an automatic shutdown of the network, operator INEOS said.

“We have now identified the issue that caused this and are hoping to resolve it this evening. We then plan to start-up again overnight,” the company said.

NBP contracts began to surge around 14:00 as traders became aware of a note that INEOS had passed onto its customers regarding the FPS shutdown.

The NBP Within-day and Day-ahead contracts rose by 2.50p/th to 54.0p/th from 14:00 to 15:00 London time, deals seen by ICIS showed, as traders frantically bought up volumes in anticipation of a supply crunch.

The March ’18 front-month jumped by around 1.50p/th as participants looked to shield themselves from a potential extended outage.

However, risk premium rapidly left the market after it looked like the shutdown would be short-lived.

After peaking at 54.0p/th, the Day-ahead dropped by around 3.00p/th up to 16:30 to close lower day on day.

Similarly, the front-month fell away from 15:00 onwards but remained around 1.0p/th higher, compared to Tuesday’s close.

Only the Within-day product retained its value, last trading at a 1.0p/th premium to the Day-ahead around 16:20.

The Forties network is essential for the operation of numerous oil, gas and condensate producing facilities in the UK and Norwegian offshore sector. When it was shut down on 11 December 2017 due to a hairline crack in a pipeline, around 35-40 million cubic metres (mcm)/day of supply into Britain became immediately unavailable. Full capacity was not restored until the end of the month.

On Wednesday, throughput at the Bacton Perenco sub-terminal were set to be reduced to 7mcm/day from 21:00, operator Perenco said at 14:00.

Up to 11mcm/day of supply into the neighbouring Bacton SEAL sub-terminal was brought offline following the shutdown of the Elgin-Franklin field, operator Total said at 14:30.