The premium of the French TRS Day-ahead gas contract over its PEG Nord counterpart has fallen in recent sessions, as the firm capacity restriction on the north-south link has eased, leading to a downturn in TRS prices. While the restriction on annual interruptible capacity remains high, however, the two contracts should remain disconnected.
The north-south link is the only route to transport gas between France’s two zones and is a key source of supply for the southern TRS network. Restrictions on the link are a key price setter for both the northern and southern zones, with bottlenecks causing oversupply in the north and shortness in the south.
Forward prices suggest TRS contracts should remain at a high premium to the PEG Nord during October, before falling to more normal levels in November.
The TRS contract’s premium over PEG Nord for October ’16 was assessed at €2.86/MWh on 20 September, while the November premium was €0.95/MWh, ICIS trade data showed.
“The end of maintenance on the [north-south] link, as well as the expectation of decreased flows from France to Spain – which have been quite high – are why the market expects the premium to fall,” one trader active in the market said.
Increased LNG send-out into the TRS zone from Marseille’s Fos terminals could be another factor.
“There are arbitrage opportunities available for LNG when the TRS premium has been high for such a long time, making LNG cargoes attractive,” he said.
Since hitting a record high of €5.85/MWh on 12 September, the TRS Day-ahead premium has fallen by more than €2.00/MWh, closing 20 September at €3.60/MWh. TRS prices were pressured by increased flows via the north-south link (see graph).
Partial restrictions on firm capacity and a 100% curtailment on interruptible capacity were enforced between 5-20 September due to a compressor failure at the Cherre station, operator GRTgaz data showed. This caused flows via the link to fall to an average of 18 million cubic metres (mcm)/day over the period, 12mcm/day lower than the 2016 average.
Although GRTgaz has now lifted the firm restriction, a severe curtailment on annual interruptible capacity remains in place, limiting flows to around 25mcm/day, 14mcm shy of the link’s maximum technical capacity.
It is unclear when the interruptible capacity restriction will clear, although traders are hopeful the situation will be resolved by the end of September.
To help compensate for physical congestion, shippers are able to access small volumes of supplementary capacity via the JTS daily auction system. One trader suggested the turnout price from these auctions has recently been a driver in the level of the TRS premium.
The JTS mechanism has been well subscribed over the summer months, with shippers booking around 1.5-2mcm/day via the service. email@example.com