Southern France will need more LNG to refill gas storage sites

LONDON (ICIS)–Southern France is lagging behind the rest of Europe when it comes to re-filling storage levels after a cold winter. An influx of LNG cargoes in the third quarter may be required to ensure enough gas is available for winter 2018/19.

Elsewhere in Europe, high injection rates mean storage levels have virtually caught up with last year. This means the outlook for spot LNG demand in the remainder of the third quarter looks weak.

Gas storage sites in southern France were just 43% full on 24 July, far lower than sites in many other European markets (see chart).

Currently, the TRS network relies on piped imports from north France and LNG imports into the Fos LNG terminals to supply its storage injections demand.

But pipeline imports from northern France have been running at maximum capacity in recent days and there is little scope to increase supply via this route. Plus, this key connection typically undergoes annual maintenance towards the end of the third quarter.
Few arrivals scheduled

Currently, just four vessels are scheduled to arrive at Fos Cavaou in August and three in September, while only two are due per month at Fos Tonkin, according to terminal operator schedules.

Strong demand for gas from the power generation sector may also necessitate more LNG arrivals.

The heatwave that has hit Europe in recent weeks shows no sign of abating which should keep demand for gas to power air-conditioning units elevated. Plus, nuclear outages in France and Belgium, coupled with low hydro stocks regionally, have further tightened the strain on the French gas sector.

This is reflected in TRS gas prices, which have surged to a premium of around $1/MMBtu to PEG Nord on a day-ahead and front-month basis. These are levels typically more associated with winter delivery, when the grid is under greater strain.

Looking ahead, the reliance on regasified send-out from Fos should lessen after the merger of the French gas hubs on 1 November 2018 as improvement work on the north-south link should allow more gas to reach vulnerable areas in southeast France.

But for the remainder of this summer, more LNG will be needed.