PODCAST: Interconnector capacity contracts to end on Monday

28 September 2018 17:32 Source:ICIS

LONDON (ICIS)--The start of the new gas year on 1 October will mark the expiry of long-term capacity contracts on the Interconnector pipeline that connects Britain with Belgium.

Capacity on the pipe, which flows in both directions, has been tied up in the long-term contracts since 1998, when shippers were granted exemptions from EU rules in order to entice investment.

Bookings will now be at the mercy of the market, with shippers looking for spreads between the Belgian and British gas markets wide enough to cover their costs.

No October capacity was sold in the last round of auctions on the pan-European PRISMA platform, or through pipeline operator IUK’s own mechanism, raising the prospect that flows could flatline once the contracts expire.

Shippers wanting to use the pipe will now have to book capacity on a within-day and day-ahead basis. Short-term bookings are more costly for the buyer and make operator IUK’s income more volatile.

Interconnector vs BBL

The new flow patterns will be watched closely by users and operators of the BBL, a rival pipeline between Britain and the European mainland that beaches in the Netherlands.

The BBL currently only flows toward Britain, but plans are underway to begin reverse flows in autumn 2019, which will put it into direct competition with the Interconnector.

Most long-term capacity contracts on the BBL expire in 2026, with one in place until 2036.

Click here to listen to the podcast and here to view an infographic about the BBL and Interconnector pipelines.

By Patrick Sykes