LONDON (ICIS)--Exports of natural gas from Belgium to the UK in November and December look set to be lower year on year, with a lower volume of gas entering Belgium from the UK in October and minimal capacity bookings on the Interconnector pipeline.
But this drop in volume will be largely made up by imports of LNG, shipping data indicates, meaning little risk to the outright supply outlook but a cut in supply flexibility all the same.
Belgium historically receives robust supply of gas from Britain during October, which is then exported to neighbouring hubs. Belgium’s imports from Britain during October averaged 19mcm/day in 2017, 13mcm/day in 2016 and 27mcm/day in 2015, according to data from the transmission system operator (TSO) Fluxys. But this year that has dropped close to zero.
Lack of flows
The shoulder month of October tends to be the last chance for shippers to fill up storage sites across Europe before winter consumption drives shippers to withdraw from storage facilities.
However, the onward transit of gas from Belgium to storage bearing countries such as Germany has been hampered due a lack of flows transiting the Interconnector since the start of October.
On October 1, long-term capacity contracts on the Interconnector pipeline ended, sweeping away a large amount of capacity that was once booked.
When demand begins to pick up, which typically occurs from mid-November onwards, British imports from mainland Europe increase. But this is dependent on good supply of gas entering Belgium from the Netherlands and Germany.
During November and December 2017, imports from Germany and the Netherlands combined into Belgium averaged 27mcm/day, and increased further going into the first quarter of the new year.
In conjunction with high imports from Germany and the Netherlands, the spread between the British NBP and the Belgian Zeebrugge market needs to be wide enough to encourage shippers to send gas to Britain.
ICIS assessed the November basis at -2.9p/th on
10 October. This is not a
high enough premium on the NBP to
incentivise shippers to send gas to Britain.
Previous ICIS analysis put this basis figure at
5.03p/th to drive UK imports.
The impact of lower volumes delivering into Belgium via the Interconnector has pushed Belgian supply reliance to other hubs and LNG. In particular, imports of H-gas from Germany have increased since the interconnector flows dropped off.
German net imports have averaged 9.5mcm/day in October, so far more than three times higher than in October 2017 as a whole, according to Fluxys data.
Storage levels across Germany are currently around 80%, 5.4% lower year-on-year, according to storage operator data. Because of the increased volumes of gas leaving Germany to supply Belgium, shippers have been withdrawing from stocks at a greater rate since the start of October.
Germany has the highest available storage capacity in Europe, totalling 23bcm and therefore the quantity of gas in stores is vital in determining Europe’s supply flexibility going into the winter.
Flows have been less impacted in the Netherlands and France. Belgian exports to France have remained strong despite lower IUK flows.
The role of LNG
The lack of supply entering Belgium from Britain has been partially offset by LNG. Send-out from the Zeebrugee terminal has averaged 18mcm/day so far this month, compared to just 2.1mcm/day in October last year.
This high level of send-out has drained stocks at the terminal but will be replenished by the arrival of four more LNG vessels that are due to berth at Zeebrugee before the end of the month, LNG Edge data indicated.
Because of this, send-out from the terminal is likely to remain high.
With minimal capacity currently purchased on the Interconnector, it is looking more likely that shippers will be exposed to paying a higher premium, because tariffs on a day-ahead basis are far more punitive than maonthly tariffs when sending gas to Britain during the first half of winter.
However, a large portion of unpurchased capacity may be snapped up during the upcoming PRISMA auction, which takes place on 15 October.