September maintenance reduces gas storage injection potential

Julie Fisher

01-Sep-2017

Natural gas shippers expecting to use cheap gas to replenish stocks in the last month of the gas summer may struggle to do this due to extensive maintenance restricting imports to Europe.

For much of the summer, day-ahead contracts have been at a premium to their related front month at many European hubs, encouraging shippers to hold off injections in the hope of buying gas to inject at a cheaper price later in the summer. This, combined with a high drawdown on stocks during the last gas winter, has left European storage sites around nine percentage points emptier at the end of August than on the same date last year, according to data collated by ICIS.

On Wednesday, the day-ahead continued to hold a premium to the front month at many hubs with large volumes of storage capacity, including the Dutch TTF and the two German hubs, according to ICIS price assessments.

Some shippers using this strategy have been caught out by significant maintenance periods scheduled for September in Norway and on the Russian Nord Stream.

There will be outages at the Kollsnes processing plant and an unnamed Norwegian field through most of September, and no gas will enter Germany from the Nord Stream route between 11-22 September.

Although the Norwegian outages were first announced in December 2016, and information on the Nord Stream maintenance was available on the operator website, some market participants appear to have only recently become aware of the works.

“The Nord Stream work especially was not well publicised,” one utility trader said. “I think there are many people still becoming aware of it.”

The pipeline operator announced the outage on Wednesday, but the information was already available on Gascade’s maintenance page.

“There is no security of supply issue,” one trader said. “But it will have an effect on how much people can add to storage.”

Storage injections are often reduced or stopped altogether if the grid is short, as was the case in the Netherlands during maintenance on the Interconnector in June.

Given the relatively low levels of gas in store and the weakened potential for storage injections in September, injections may continue into October so long as cold weather and unplanned outages do not restrict the availability of gas. The October ’17 and September ’17 contracts were priced fairly close together at key European hubs on Wednesday, providing financial support for continuing injections into October. julie.fisher@icis.com

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