September 14, 2021

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EU Gas Breaks New Records Amid Cold, Nord Stream 2 News

European natural gas prices continue an unprecedented bull run with near-term contracts trading above $22 per million Btu following cold weather forecasts and the possibility that the Nord Stream 2 pipeline will not start operations until well into 2022.

A tight supply situation caused by low Russian piped gas flows and low LNG intake into Europe is causing the region to enter October, the traditional start of the high-demand winter season for the gas market, at historic lows.

LNG imports into Europe are down by some 30% in the third quarter compared to 2019-20 averages, according to analysts at Morgan Stanley.

The month-ahead October contract on the Dutch TTF hub, Europe’s de facto benchmark, rose to new highs of €65.80 per megawatt hour ($22.75 per million Btu) on Sep. 14. This compares to the contract trading at around €11/MWh at the same time last year.

The TTF month-ahead contract is used as the reference price for LNG cargoes sent to Europe.

Nord Stream 2 Approvals to Take Months

German energy regulator Bundesnetzagentur confirmed Monday that it has four months from Sep. 8 to issue a draft decision on whether to approve Nord Stream 2’s project developer as a transmission system operator and send it on to the European Commission.

The commission has up to four months to come up with a legal opinion on the regulator’s decision, experts consulted by Energy Intelligence say. The German regulator then has two more months to issue a final decision on the matter.

This means that if all is approved, the start of operations for the Nord Stream 2 pipeline could be delayed to summer 2022. Pipeline construction was completed last week after 18 months.

Traders had expected some Nord Stream 2 flows to start up in the fourth quarter of this year but have now realized that there will be no additional Russian flows entering Europe in 2021, the head of a trading desk at a German utility says. This has reinforced the perception that the supply tightness will continue at least into spring.

“This news was not exactly new but the market is so jittery that they are reacting to any headline that mentions Nord Stream 2,” a gas trader with a European major says.

The project also needs an approval from the mining authority in Germany’s Mecklenburg-Vorpommern region before it can start flowing. A spokesperson for the authority tells Energy Intelligence it has yet to receive the documentation from the Nord Stream 2 AG project developer that certifies the technical safety of the pipeline from an independent expert.

The authority does not know when these documents will be available, it added.

Possible Winter Freeze

Forecasts for a cold start to the winter season have also fed into the European gas bull run, coupled with the expectation of lower wind power output, according to the trading desk chief.

“Looks like a low probability of an extended cold wave but right now there is some belief that it will be cool in October,” he said.

Extremely high gas prices have allowed coal-fired power generation to be in the money for some months in Germany.

However, record spot baseload power prices across Europe fed by the bullishness in the gas and the carbon dioxide allowances market will translate into additional gas-fired power demand, which will put a further strain on supplies, the trading desk head adds.
Jaime Concha, Copenhagen

Turk Stream Flows Down on Fresh LNG Imports

Gazprom’s Turk Stream gas flows to Southern and Eastern Europe decreased in September, partly on an LNG inflow to Greece.

This is not the first time when fresh LNG cargoes arriving in the LNG import terminal in Revithoussa forced a reduction in Turk Stream gas flows to Greece, marking the persistent competition between LNG and pipeline gas in Southern Europe despite the record-high spot prices.

Turk Stream flows to Europe fell 17.3% on the month to some 390 million cubic meters in the first 13 days of September, according to gas transmission data. That corresponds to a utilization rate of slightly below 70% for the Europe-bound 15.75 billion cubic meter per year line of Turk Stream. The other line of the same capacity solely supplies Turkey.

Gazprom did not comment on the decrease in Turk Stream supplies.

Revithoussa LNG Inflow

The drop is largely due to lower imports by Romania, which were down 50% on the month to some 83 MMcm in Sep. 1-13, and Greece — down 40% to 73 MMcm. Imports by Bulgaria remained flat, while supplies to Serbia increased significantly due to a ramp-up of the Turk Stream’s onshore continuation dubbed Balkan Stream which on Oct. 1 should take gas even further to Hungary.

Daily flows to Romania have been generally flat since a drop on Sep. 1, while flows to Greece have fluctuated, mirroring the dynamics of LNG imports in Revithoussa. Entry flows from the LNG terminal to the gas grid increased 21% on the month to some 123 MMcm, with spikes in daily flows on Sep. 6 and Sep. 12 corresponding to the drops in Turk Stream flows on the same days and vice versa, a decrease in entry flows on Sep. 10-11 coinciding with a two-day partial recovery in Turk Stream flows.

Gazprom’s Restricted Supply to Europe

Russian gas supplies to Central and northwestern Europe remain restricted in the meantime, although flows via the Yamal-Europe pipeline appear to have restored close to maximum levels after more than a month of decreased supplies.

Gazprom’s flows via Ukraine remain just below 110 MMcm/d, after falling from some 124 MMcm/d on Sep. 1, as Gazprom did not book any extra transit capacity for this month.

Despite strong year-on-year growth, Russian gas flows haven’t been sufficient to cover the unusually high demand stemming from low gas stocks and limited LNG imports. Market players and analysts suspect Gazprom of deliberately tightening the market by restricting Ukrainian and, since late July, Yamal-Europe flows and believe this tactic has been one of the key factors behind the continuing growth in spot prices. Gazprom denies that it deliberately restricts supplies, insisting it fulfills all the contractual obligations.

The prices for October gas futures exceeded $800 per thousand cubic meter, or $22.40/MMBtu, during the Tuesday trading session at Dutch TTF on Tuesday.

Yamal-Europe Flows Restored

Yamal-Europe hourly flows restored to over 36 gigawatt hours per hour, or 3.5 million cubic meters per hour, on Tuesday morning, up 30% from an average hourly flow on Monday and the same level as in late July, before Gazprom slashed the flows by around 40% without any evident reason.

In early August, Yamal-Europe flows were additionally hit by a fire at a gas condensate treatment plant, which forced Gazprom to temporarily stop production from condensate-rich gas fields in West Siberia. Daily flows were restored to pre-blaze levels in late August but until Tuesday they remained below the late July levels.
Vitaly Sokolov, Moscow


In Brief

Santos Inks MOU With East Timor on CCS

Santos has signed a memorandum of understanding (MOU) with the petroleum and mineral regulatory authority of East Timor to progress a carbon capture and storage (CCS) project at its Bayu-Undan field in the Timor Sea.

Santos and the regulator intend to work together to test the viability of repurposing the existing Bayu-Undan facilities and using the Bayu-Undan reservoir for CCS.

Santos and the regulator will share technical, operational and commercial information, assess the regulatory framework, evaluate local capacity opportunities and establish a decision timeline.

Santos claims the Bayu-Undan reservoir could store approximately 10 million tons per year of carbon dioxide.

Santos signed another MOU earlier this year with Italy’s Eni to investigate options to repurpose the Bayu-Undan facilities for a CCS project.

Santos has a 43.4% operated interest in Bayu-Undan. The remaining interest is held by SK E&S (25%), Inpex (11.4%), Eni (11%) and Tokyo Timor Sea Resources (9.2%).
Marc Roussot, Singapore

Spot LNG Jumps Again

Northeast Asian spot LNG prices jumped by $1.45 week on week to $21.60 per million Btu, according to Energy Intelligence assessments for deliveries four to eight weeks ahead. Spot prices in Southwest Europe jumped $1.75 higher to $20/MMBtu.

A trader said that “Nord Stream 2 seems to be holding the cards to
how this winter market will play out.” But other traders believe a price collapse caused by completion of the pipeline was driven by sentiment. While they expect
more of the same when the Russian shipments start, they don’t think it will last.

“The impact of Nord Stream 2 is really going to depend on how much gas is going to flow from Russia. I do not think there is a consensus on extra capacity being equal to extra production, as Russia will be constrained on the extent of gas that is available to flow,” another trader said. He added that Nord Stream 2 “does not change the overall picture that Europe is short of gas over the winter.”
Created with Highcharts 9.0.0($/MMBtu)REGIONAL SPOT PRICESNortheast AsiaSouthwest EuropeOct '20Nov '20Dec '20Jan '21Feb '21Mar '21Apr '21May '21Jun '21Jul '21Aug '21Sep '21051015202530Energy Intelligence

Michael Sultan, Washington


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India18.5518.9318.6218.9118.2918.1419.3017.8819.2318.6518.0117.7918.07
Sodegaura, Japan19.4020.5320.5520.6119.3816.5720.2318.5220.1320.9018.7718.0519.50
Zeebrugge, Belgium13.2111.9411.6511.9812.8213.1012.5211.6112.4111.6512.9312.2213.00
Huelva, Spain19.3618.0617.7518.1118.9318.7818.6517.6618.5417.7618.9918.1919.00
Isle of Grain, UK20.6719.3018.9919.3520.2720.5420.0218.9719.8219.0020.3619.6020.43
Everett, US4.323.073.343.114.073.960.013.703.542.794.48----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback12. Apr26. Apr10. May24. May7. Jun21. Jun5. Jul19. Jul2. Aug16. Aug30. Aug13. Sep0510152025Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia21.6021.601.18--
SW Europe20.0020.00-1.23--
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)0.035.265.234.57
NBP, UK (futures)+1.6222.8321.2118.88
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF1.4922.7721.2818.54
Zeebrugge (Belgium)--------
German NCG1.1316.3215.1913.21
NBP (UK)1.5222.9821.4518.55
US Markets
US Spot Prices
Sabine Pass, Louisiana0.175.365.194.67
Corpus Christi, Texas0.175.285.114.68
Cove Point, Maryland0.065.004.944.03
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month0.035.265.234.57
Second Mth0.035.315.274.62
Third Mth0.035.405.374.70
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexUK NBPNE AsiaOct '20Nov '20Dec '20Jan '21Feb '21Mar '21Apr '21May '21Jun '21Jul '21Aug '21Sep '21051015202530Energy Intelligence