UK natural gas demand to dip 2.5% in Summer 2018: National Grid
UK natural gas demand is set to drop to 35.7 Bcm in the Summer 2018 period (April 1-September 30), a year-on-year fall of 2.5%, gas system operator National Grid said Tuesday, as higher forecast local distribution zone (LDZ) demand is set to be offset by lower storage injections and a decline in consumption by the gas-fired power sector.
Related article: UK power grid warns of falling Summer 2018 demand
Gas exports to the Continent via the IUK pipeline are also set to increase this summer by 2.9% year on year to 7.2 Bcm, with forward prices currently pointing to a premium for northwest European hubs over the UK NBP price, National Grid said.
The TTF Q3 price on Monday was assessed by S&P Global Platts at Eur18.475/MWh, a premium of Eur0.31/MWh over the corresponding NBP price.
As a result of higher exports to Europe, storage injections are expected to total 1.8 Bcm in Summer 2018, down from the 2.5 Bcm of injection demand in Summer 2017, though the behavior of the UK’s medium-range storage (MRS) sites is expected to be similar to last year, which saw an increase in short-term storage cycling.
“Gas demand for Summer 2018 is expected to be slightly lower than Summer 2017,” National Grid said.
Gas for electricity generation is expected to be lower than last summer at 9.9 Bcm as a result of lower overall electricity demand and an increase in renewable generation, it said.
Summer natural gas supplies and demand in UK
At the same time, supply is looking robust again — with UK gas output expected to rise to 17.9 Bcm this summer, a forecast increase of 3.5%, and Norwegian supplies set to stay high at some 13.2 Bcm, flat year on year.
“While we expect there to be sufficient gas supply to meet demand for Summer 2018, we expect there to be more gas than is needed. Our analysis indicates that any excess gas will be exported to Europe,” it said.
National Grid said demand in Europe for gas for injection into storage will be high this summer as storage was heavily used to support high demand in the cold weather during February and March.
This, it said, has contributed to forward prices that suggest that flows through IUK this summer will mostly be from the UK to Belgium.
It pointed out that in Summer 2017, IUK flows were all toward Belgium with no days of reverse flow.
It added that it was not expecting any significant supply through the Dutch-UK BBL pipeline this summer, as has been the case since the summer of 2014.
In Summer 2017, just 15 million cu m of gas flowed through the BBL to the UK, according to data from S&P Global Platts Analytics, with minimal flows on a total of just 18 days.
Natural gas flows via BBL drop to almost zero in Summer 2017
The IUK is set to be closed for its annual maintenance period from June 13-28, and National Grid expects that to mark the start of significant injections into the UK ‘s MRS facilities.
“In recent years there has been a trend for more injections and withdrawals to be made from MRS during the summer period,” it said.
“The first significant and sustained injection in Summer 2017 was made when the IUK was closed for annual maintenance as gas that had been flowing to Europe became available for MRS injection,” it said.
“The interconnector outage effectively presented greater opportunity to the market for MRS cycling together with increasing MRS stock volume. With comparable market conditions expected in Summer 2018 we expect MRS to behave in a similar way to Summer 2017.” The UK ‘s eight MRS sites have a total capacity of 1.4 Bcm, though injections can surpass that figure given repeated injections and withdrawals.
Forecast natural gas demand profiles for Summer 2018
National Grid also said it expected fewer cargoes of LNG to arrive into the UK in Summer 2018, with a total of 2.9 Bcm of gas equivalent set to land, down 12.1% year on year.
“Forward prices suggest that Asian markets this summer will attract a higher price than the UK so we are not expecting very high LNG deliveries,” it said.
The Asian spot LNG benchmark JKM price for May delivery was assessed Monday by S&P Global Platts at $7.125/MMBtu, a premium of $0.29/MMBtu over the May NBP price of $6.835/MMBtu.
For June delivery, the JKM was assessed at $7.30/MMBtu, almost a dollar higher than the NBP June price assessed at $6.425/MMBtu on Monday.
National Grid said global demand for LNG rose sharply in 2017 with supplies to China, Japan and Pakistan reaching record levels.
“With such a dynamic global market it is hard to predict how much LNG will be available for the UK,” it said.