TRS gas prices to fall on back of LNG influx, relief for French CCGTs

Alex Thackrah

31-Jan-2017

Natural gas prices in France’s TRS zone could remain elevated this week, but LNG vessel arrivals in February should bring relief to the southeast, which has been dogged by a perfect storm of high demand and low supply in recent weeks.

Grid operator GRTgaz issued a fresh red-level system alert via its vigilance system on Tuesday morning, indicating a local gas deficit had been observed, or was highly likely. GRTgaz had amber warnings in place for the rest of the week.

LNG send-out from the Fos terminals – a key source of supply for the TRS zone and driver behind the recent price spike – is projected at just 5 million cubic metres (mcm)/day until Saturday.

But warmer weather and more LNG cargoes are on the way, which should help to bring prices down thereafter, said a trader at a utility on Tuesday afternoon.

Six of the best

GRTgaz announced on Tuesday there are six LNG cargoes due at the Fos Cavaou LNG terminal in February, double the number of arrivals in January.

This tallies with the operator’s projections, which show send-out from Fos will ramp up to average 12mcm/day between 6-12 February and 24mcm/day between 13-28 February.

This should bring some relief to combined-cycle gas turbines (CCGTs) in the TRS zone, boosting profit margins at a time when power demand is expected to begin creeping up.

Most recent figures indicate slack in the French CCGT fleet of some 2GW. In week 3, when France was struck by very cold weather, its gas-fired plants collectively averaged output of 9.2GW over the two coldest days. So far in week 5, this figure has fallen to a little over 7GW as demand has slid.

With power demand in the latter half of week 6 expected to creep back up, coinciding with the ramp-up of send-out from the Fos terminal and by extension an increase in profit margins for TRS gas plants, some 2GW of gas-fired capacity that has been switched off could be expected to fire back up.

Vessels

The first vessel to arrive at Fos will be the 75,000cbm ENGIE-chartered Global Energy on 4 February, having just picked up a cargo at northern France’s Montoir terminal, according to LNG Edge.

This is the second time in two weeks that a vessel has delivered LNG from north to south France, after the 154,000cbm GDF Suez Point Fortin discharged on 24 January.

A question mark surrounds the 153,000cbm Esshu Maru, which was due to reload at the Netherlands’ Gate terminal late last week, before discharging a cargo at Fos. But the vessel is still loitering outside Gate, having not yet reloaded, according to ICIS LNG Edge.

Market intelligence suggests Algeria’s Skikda LNG terminal will soon resume operations, following a month of inaction due to technical problems. This raises the possibility of additional Algerian cargoes heading to southern France and Spain. In January, incumbent Sonatrach was only able to send cargoes from the Arzew facility.

Storage drain

Because of a lack of LNG arrivals in recent weeks, storage sites in southeastern France have been drained at an alarming rate. The Saline group of sites are now less than 35% full, according to GRTgaz, the lowest January level for five years.

The news of the impending pick-up in LNG send-out initially hit the market on 27 January, crushing TRS prompt and near-curve delivery contracts in the process. The Day-ahead shed €9.175/MWh during Friday’s session.

The contract had hit a record high of €40.75/MWh on 25 January, driving its premium over PEG Nord to €19.10/MWh. alex.thackrah@icis.com

READ MORE

Global News + ICIS Chemical Business (ICB)

See the full picture, with unlimited access to ICIS chemicals news across all markets and regions, plus ICB, the industry-leading magazine for the chemicals industry.

Contact us

Now, more than ever, dynamic insights are key to navigating complex, volatile commodity markets. Access to expert insights on the latest industry developments and tracking market changes are vital in making sustainable business decisions.

Want to learn about how we can work together to bring you actionable insight and support your business decisions?

Need Help?

Need Help?