LONDON (ICIS)--The upcoming shutdown of Denmark’s largest natural gas field will be a key development for the country in 2019, as the market learns whether preparations have been sufficient to avoid shortages and price spikes.
Tyra, Denmark’s largest gas field which accounts for more than 90% of domestic production, will be fully offline from 1 November 2019 until 1 July 2022 for redevelopment work. Production from the field will ramp down gradually from 1 March.
Transmission system operator Energinet is still finalising its planned measures to ensure security of supply in Denmark during the redevelopment period, but the country will be primarily reliant on imports from Germany and storage reserves during this time.
There is also the potential for some supply from Norway from early 2022, when a planned tie-in to Europipe II is expected to be completed.
The operator plans to replace the current differentiated tariff scheme with uniform tariffs from 1 October.
Under the differentiated capacity tariff scheme, shippers bear the costs of new natural gas infrastructure. In the past, shippers transporting gas from Germany to Denmark via the Ellund entry point paid slightly more than shippers importing gas from the North Sea fields via the Nybro entry point.
Uniform capacity tariffs will erase these differences, which should help to encourage the use of Ellund during maintenance at the Tyra field.
Energinet has also proposed to remove balancing price caps during the period in order to incentivise shippers to balance their positions, as well as providing more detailed data on storage and offering more flexible cross-border capacity products.
Within-day trade is likely to become more common during the field closure, with shippers using intra-day products to remain in balance.
While an early warning state was in place from for around three weeks in February-March 2018, some 169GWh was dealt within-day on the exchange, compared with just 29GWh over the same period in 2017. This was because Energinet removed the balancing price cap due to the warning state, which incentivised traders to avoid paying the high balancing charges.
If Energinet removes the balancing price cap for the duration of the Tyra shutdown, this should again encourage shippers to use within-day contracts to balance more.
Denmark and Sweden will become a unified joint balancing zone from 1 April.
As Sweden’s current market structure does not comply with the EU network code on balancing, the new balancing zone will effectively adopt the Danish model.
For Danish counterparties, the merger itself will have relatively limited impact. There will be some small changes to the country’s entry-exit capacity model, but overall the main impact will be to simplify the balancing process for shippers with end-user customers in Sweden, as they will no longer have to balance in two separate markets.
Sweden only has physical access to the European market via Denmark, at the Dragor point. As a result, almost all Swedish shippers are active on the Danish market. Swedish gas demand totals around 1 billion cubic metres per year.