Europe, U.S. injecting gas into UGS facilities at minimum; Gazprom transit request via Ukraine 42.1 mcm

MOSCOW. Aug 19 (Interfax) – The latest data published on Thursday evening on gas statistics in the United States indicate that the recovery of gas inventories in the country’s storage facilities continues to lag far behind schedule, posing another threat to the U.S. gas market that is closely related to the upcoming winter in Europe as well.

The request for transit of Russian gas through Ukraine on Friday has changed little from the previous days and months.

UKRAINE TRANSIT

Gas Transmission System Operator of Ukraine or GTSOU has accepted a request from Gazprom for Friday to transport 42.1 million cubic meters of gas through the country, the same as on Thursday, 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 42.1 mcm on August 19, with booking via the Sokhranivka metering station declined," Gazprom spokesman Sergei Kupriyanov told reporters.

GTSOU has declared a force majeure in regard to accepting 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 to operations as before.

EUROPEAN MARKET

Spot prices for gas in Europe, with Nord Stream compressors out of action, have risen to $2,492 per 1,000 cubic meters for the TTF day-ahead contract.

Prices in Asia are rising on the back of prices in Europe. The most expensive January futures on the JKM Platts index, which reflects spot market prices for gas delivered to Japan, South Korea, China and Taiwan, have reached $2,273.

Pumping via the Nord Stream pipeline from Russia to Europe has fallen to 33 mcm per day. At full capacity, the pipeline could pump up to 167 mcm of gas per day, though capacity has been falling owing to disruptions in the maintenance schedule for compressor equipment at the Portovaya compressor station that feeds the pipeline. It has gas-pumping turbines from Rolls-Royce, whose gas turbine business was subsequently acquired by Germany’s Siemens.

The delays are owing to sanctions that Canada has imposed against Gazprom, resulting in one turbine not having been returned to Russia on time from Siemens Energy’s service center in Montreal. Meanwhile, the time has come for maintenance on the other turbines, owing to their having reached the end of the operating period between repairs, as well as because of breakdowns.

Some capacity of the Norwegian Troll field and the Kollsnes gas treatment unit will be shut down for annual maintenance from August 13 until the end of the month. Production capacity will decrease by 20 mcm of gas.

Wind plants have generated 9.2% of the European Union’s electricity since Monday and 9.7% in the past week, data from WindEurope show.

LNG regasification terminals in Europe have been operating at 60% capacity in August, compared to July’s average of 69%, according to Gas Infrastructure Europe data. This is primarily owing to the shutdown of the large Adriatic LNG terminal in Italy for almost the whole month. As a result, Italy’s LNG imports have fallen over 50% compared to July levels. Average daily supply from LNG terminals in August is down 12% month-on-month.

A new challenge awaits Europe’s diversified gas supply. The hurricane season, usually peaking between mid-August and mid-November, is about to begin in the Gulf of Mexico, which could limit the ability to export American LNG.

GAS STOCKS

Europe continues to inject gas into underground gas storage (UGS) facilities. Data on the state of UGS facilities, whose levels are now regulated by the law, have become one of the most important economic and political indicators for Europe, reflecting EU leaders’ ability to ensure energy security.

Inventories in UGS facilities are currently at 75.88%, up just 0.33 percentage points from the last reporting date, August 17, according to Gas Infrastructure Europe data. The figure is the lowest over the past 15 days.

Europe has imposed tight regulations on the use of UGS facilities this year. Reserves are supposed to be at least 80% of the UGS facilities’ capacity by the start of the 2022 offtake season and increase to 90% in subsequent years.

The minimum target level for inventories is already quite close, and the average level for the EU could reach 80% by the end of August, though operators are continuing to expedite pumping amid a severe energy shortage in the region, with intense heat, dry weather, and peak gas and electricity prices. Prices are currently high, but they could go even higher in the autumn and winter. Gazprom has already warned about growth potentially reaching $4,000 per thousand cubic meters.

Gas inventories in UGS facilities have currently exceeded 80% in Belgium, the Czech Republic, Denmark, France, Poland, Portugal, and Spain.

PUMPING IN U.S.A.

As for the U.S., extensive gas exports are reducing resources available for pumping gas into storage facilities there. This factor is supporting prices on the U.S. domestic market. The current level of gas reserves in UGS facilities is only 4.96% above the five-year minimum. This gap is only narrowing during this summer’s injection season, according to the U.S. Energy Department’s Energy Information Administration. Current inventory lags 13% behind the five-year average. The situation with filling UGS facilities has improved slightly owing to a halt in exports through the Freeport LNG terminal following an accident.