Tight Dutch-British gas prices to squash BBL Q3 ’19 demand

LONDON (ICIS)–Tight price differences between the Dutch TTF and British NBP third quarter products should keep a lid on British exports to the Netherlands on the BBL pipeline when it becomes bidirectional on 1 July.

The BBL pipeline traditionally ships gas from the Netherlands to the UK, and it will be the first time gas will be able to be sent in the opposite direction when the pipe’s reverse flow capacity is launched next week.

But the TTF front month premium to the NBP has been gradually decreasing since the end of May, lowering any financial incentive to use the new capability.

In May the TTF front month contract was on average €0.923/MWh more expensive than the NBP. In comparison, during June, the spread tightened with the TTF July ’19 averaging a €0.415/MWh premium to the NBP front month.

In fact, the NBP July ’19 product was just a €0.083/MWh premium to the TTF on 21 June.

On the same day, The TTF August ’19 product closed €0.263/MWh above the NBP equivalent, while the TTF September ’19 contract was assessed at a €0.208/MWh discount to the NBP counterpart.

As the monthly capacity for reverse flows (Britain-to-the-Netherlands direction) will cost €0.298/MWh on the BBL pipeline in July, August and September the current monthly spreads will not cover transport fees and therefore they make flows through the pipeline on a monthly basis highly unlikely for now.

“Overall there are few elements which would push up reverse flows”, one trader told ICIS. He said that consumption may have an impact on flows as next week temperatures in the UK will be lower than in mainland Europe.

Another said that if LNG keeps coming to Europe in July, there will be no flows on the BBL.

Monthly capacity for July has not been auctioned on the PRISMA platform.

This means that flows through the BBL pipe will most likely be sold on a day-ahead basis next month.

On 21 June, the TTF Day-ahead was assessed by ICIS at a €0.235/MWh discount to the NBP counterpart.

However, the day-ahead capacity cost for reverse flows in July is €0.304/MWh, which means that the current day-ahead spread must widen further in order to make flows through the BBL pipeline profitable for shippers.

Last week, UK regulator, OFGEM approved the modified general terms and conditions of BBL Company (BBLC) in relation with the introduction of physical reverse flows from Britain to the Netherlands.