Page 9 - GLNG Week 32 2021
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GLNG EUROPE GLNG
Gas prices hit new highs on Russian supply and gas storage problems
PERFORMANCE
GAS “TTF Day Ahead” prices hit a historic high of over $550 per 1,000 cubic metres as export flows to Europe remain low after a fire at Gaz- prom’s Urengoy condensate treatment plant last week.
The last time prices were this high was dur- ing a spike in demand caused by the “Beast from the East” storm that saw temperatures around Europe plunge.
Current prices have been driven up by more mundane means. Flows on the German border at the Mallnow compressor station were down by half on August 11, Bloomberg reported. The volumes to Germany were down 44% (vs. pre-accident levels) to 0.84 mcm per hour, according to Gascade, meaning total flows of 30 mcm per day.
Gazprom is taking gas from underground storage in Europe to make up for lower flows via the Yamal-Europe pipeline, according to an unnamed source quoted by Bloomberg. Gaz- prom has refused the option of sending more gas to Europe via Ukraine. While Gazprom has book all the available guarantee transit capacity offered by Gas Transmission System Operator of Ukraine (GTSOU) it has refused to book the larger volumes of the “interruptible” capacity, as GTSOU has not offered the usual deep discounts on this capacity.
The increased demand for gas due to the extreme weather conditions this year and the transit outages between Russia and Europe caused by maintenance and more recently Gaz- prom’s accident mean that storage of gas is unu- sually low for this time of year and the state of the heating season only a few months away.
Gazprom Export said in a statement on August 11 that it is meeting its firm obligations in Europe, but it did not comment on flows via Yamal-Europe. Since August 5, Gazprom has withdrawn 15mmcm per day from its Rehden site, which has led to a 22% decrease in storage levels, Kommersant reported. The Rehden site has seen six days of negative trends, and the facil- ity has gone from 9.17% full to 7.61% full since last Thursday, citing GIE data.
Total European gas storage is on the rise, with levels 60.06% full as of Tuesday, 10 August, according to GIE, and Europe has not seen a withdrawal trend. Total German stocks of stored gas are filling up but were only 53.5% full as of August 10 vs. 90.2% full at this time in 2019-20 and 62.9% full in 2018, according to GIE data.
Russia does not report its underground stor- age levels, but Gazprom tries to keep at least 72.6bcm in underground storage in Russia, according to Bloomberg. Kommersant, citing unnamed sources, reported that Gazprom could
be filling Russian reserves before sending more gas to Europe.
Klaus Ernst, chairman of the Bundestag’s committee on economics and energy, said that Nord Stream 2 could help make up for the lack of flows to Europe before winter, Kommersant reported. The first line of Nord Stream 2 has been completed, and the second could be finished in the coming weeks, according to recent com- ments from Sergei Nechaev, Russia’s ambassador to Germany, TASS reported.
“Unless we missed something, there are still legal issues in bringing Nord Stream 2 on line (including its certification) that cause us to be cautious on the possibility of the pipeline step- ping in to alleviate pressure on the European gas market. In addition, Nord Stream’s capacity is limited due to an EU decision to limit the capac- ity of the OPAL pipeline, with Germany losing an appeal to restore capacity, Reuters reported in July. Nord Stream, according to our under- standing, was using the EUGAL pipeline (the offtake pipeline intended for Nord Stream 2) to help keep its capacity up due to the limitations on OPAL,” analysts at VTB Capital said in a note.
“Our view now is that prices are likely to remain high in Europe even if some LNG is exported to the continent instead of Asia, and that flows to Europe via Yamal-Europe could be limited for some time. We do not see Nord Stream 2 coming in to relieve pressure on the market in Europe without material legal changes. In terms of what this means for Gaz- prom, the decline in export flows should be partially compensated for by higher prices, but it could ultimately do damage to the company’s reputation and push Europe to look for further ways to diversify its energy supply, we think,” VTBC added.
Week 32 13•August•2021 w w w . N E W S B A S E . c o m P9
