Italy now favoring gas via Switzerland from France over Germany
There has been a shift in natural gas supply dynamics into Italy via Switzerland in recent months, with gas sourced from France now supplying the bulk of gas entering northern Italy by this route rather than Germany.
So far this year, France has exported a total of 2.911 Bcm into Switzerland compared with 2.885 Bcm from Germany, data from S&P Global Platts Analytics shows, meaning that of the gas consumed in northern Italy, 52% came from France.
This is in stark contrast to last year, where France accounted for 31% of the total, 26% back in 2017, and a mere 11% in 2016, the data showed.
France has been able to shift more gas via Switzerland into Italy because of much higher LNG regasification there allied to more pipeline imports from Belgium than a year earlier.
LNG regas in France so far in 2019 is 8.991 Bcm, over two and a quarter times higher on the year, with imports of H-cal gas from neighboring Belgium almost tripling to 5.411 Bcm.
With a flood of LNG having arrived in Northwest Europe due to low Asian prices due to weak spot demand in the region, pricing in LNG-heavy hubs has been at a large discount to those in Germany, which does not currently have an LNG terminal.
PEG spot delivery so far in 2019 has come in at Eur17.183/MWh according to Platts price data, a discount of 49.2 euro cent discount to the NetConnect Germany area — during 2018, the PEG hub (PEG Nord January 1-October 30) averaged a 15.9 euro cent discount to NCG and a 9.6 euro cent discount back in 2017.
Moreover, entry and exit tariffs for firm capacities out of Wallbach have increased this year, meaning that the cost of moving gas from Germany into Italy via Switzerland has risen.
The recent trend could be set to accelerate further in June, with the PEG month-ahead contract assessed some 72.5 euro cent shy of the NCG equivalent and a large Eur3.625/MWh discount to the PSV hub, meaning that French exports of gas into Italy through Switzerland will be even more economical at the end of the second quarter delivery period than in recent months.