Europe boosts LNG consumption instead of drawing on UGS reserves, Gazprom transit request via Ukraine - 42.4 mln cubic meters
MOSCOW. Nov 14 (Interfax) - European gas companies this autumn are first and foremost seeking to make use of supplies in LNG acceptance points, rather than tapping reserves in UGS facilities. This largely explains the artificial delay in the beginning of the UGS offtake season.
Gazprom's request for pumping via Ukraine was unchanged from previous days and months.
UKRAINIAN TRANSIT
The Gas Transport System Operator of Ukraine, or GTSOU, has accepted booking from Gazprom to transport 42.4 million cubic meters of gas through the country on Monday, unchanged from the previous gas day, data from GTSOU show.
Capacity was requested only through one of two entry points into Ukraine's Gas Transport System, the Sudzha metering station. A request was not accepted through the Sokhranivka metering station.
"Gazprom is supplying Russian gas for transit through the territory of Ukraine at the volume confirmed by the Ukraine side via the Sudzha metering station at 42.4 mcm on November 14, with booking via the Sokhranivka metering station declined," Gazprom spokesman Sergei Kupriyanov told reporters.
GTSOU has declared a force majeure with respect to acceptance of gas for transit through Sokhranivka, claiming that it cannot control the Novopskov compressor station. Ukraine has also said that if gas continued to be fed from Russia to the Sokhranivka station, amounts would be reduced accordingly at the exit points from Ukraine's gas transport system. The route through Sokhranivka had provided transit of more than 30 mcm of gas per day.
Gazprom believes there are no grounds for the force majeure or obstacles to continuing operations as before.
EUROPEAN MARKET
According to current weather forecasts, winter temperatures should set in Europe as early as the middle of this week, and by the weekend, even more serious drops to multi-year lows are expected.
However, this is just a forecast that can change several times a day. Nevertheless, as far as this cold snap is concerned, so far it has only changed in the downward direction.
The day-ahead contract at the TTF hub in the Netherlands closed at $717 per 1,000 cubic meters, up more than four times compared to the start of November ($225).
December TTF futures are at $1044.
Wind power generation in Europe averaged 20% last week, compared with 18% in the first and second weeks of November, according to WindEurope association data. At the same time, wind turbine output began to fall over the weekend, dropping to 13% on Sunday.
The Nord Stream pipeline is completely shut down. The Siemens engines used for its operation are leaking oil, and this malfunction can only be repaired at the factory. This is only possible at the Montreal plant, and Canada has imposed sanctions on Gazprom. In addition, last week there was a depressurization of two strings of Nord Stream 1 and one of Nord Stream 2 near the Danish island of Bornholm.
EUROPEAN INVENTORIES
During the prolonged pre-winter period, Europe demonstrated a new model for managing the gas balance. As the air temperature drops, it is the LNG reserves in acceptance reservoirs that are used up first, rather than gas in UGS facilities. However, the practice of operation of European terminals has already hit somewhat of a "glass ceiling" in its capacity. So far, the maximum historical level of their utilization has been 77%, and last week it reached 74% (and this is just the very beginning of the winter season).
Europe is about to start net offtake of winter gas reserves. The current state of reserves can no longer be called injection in the literal sense of the word (the increase over the last weekdays is in tenths of a percentage point).
The start of this year's offtake season will be the latest in GIE observation history (since 2011). The previous record was in 2013 (reserves began to decline on November 4).
Inventories in UGS facilities are currently at 95.51%, which comes to 102 bcm of active gas, an increase of 0.08 percentage points from the last reporting date, according to Gas Infrastructure Europe data. Italy and the Netherlands demonstrated net offtake on the gas day of November 12.
At the same time, Gazprom warned that "the load on Europe's UGS facilities will be higher than in previous years due to the changed logistics and sources of gas supply to the European market."
European LNG terminals have increased their regasification capacity in response to lower temperatures. Since the beginning of November, their capacity utilization rate is 67%, compared to an average of 60% in October.
U.S. INVENTORIES
Before the start of the offtake season, U.S. gas producers are increasing gas injection into storage to make up for the summer lag in restoring reserves.
During the latest reporting week (ended November 4), 2.2 billion cubic meters of gas were injected into UGS facilities, which is significantly higher than the usual injection rate for this time.
The current inventory level is about 75%. It can already be called normal, as it is only 2% below the average for the last five years, according to the U.S. Department of Energy's Energy Information Administration (EIA).
Nevertheless, this is significantly less than the reserves in the European and Russian UGS facilities.
The EIA now UGS reserves to decrease by 60 billion cubic meters this winter (the five-year average). At the end of March, natural gas volumes in storage will amount to 40 billion cubic meters, which is 8% lower than the five-year average.