UTW insights: Gas oversupply possible this summer

UTW insights: Gas oversupply possible this summer

Scheduled maintenance in gas infrastructure across Europe is estimated to impact total production 30% less than the previous year. Added to other factors, this could accelerate a gas oversupply which is expected to weaken prices this summer.

Operators schedule the majority of the year’s planned maintenance during the summer season. This is when demand is typically low and the impact of constrained supplies is minimised. The below graph shows the potential impact on UK gas supply availability as a result of planned maintenance during 2016 and 2017.

Gas oversupply

A cumulative total of more than 10bcm of potential supply to the UK was lost due to maintenance in 2016. ­­This included two periods, in early June and early September, when unavailable supply topped 150mcm per day. However, the maintenance schedule for this year has a total impact to the UK of under 7bcm. This is more than 30% lower than the previous season. Most of this reduction appears to be driven by activity in Norway. Norwegian field maintenance for 2017 is expected to impact just 1.5bcm of supply. This is down from 4.3bcm last year. The 2016 summer also saw additional Terminal shutdowns in Norway, Europe and the UK. These have yet to appear this year.

Peak gas oversupply

With the Rough gas storage site unavailable, gas supply flexibility for the UK will come predominantly from the Interconnector with Belgium. Current exports across the Interconnector are around 50mcm per day. The link shuts down for two weeks each year, usually in June. The closure will leave the UK unable to export excess supply to the Continent, and with injections into Rough unavailable this is when the issue of oversupply is likely to reach its peak.

Expectations of gas oversupply in the UK have come about for several reasons. Milder temperatures inherently reduce demand for domestic heating. Meanwhile, minimum power demand is expected to be lower. This is in part due to the rise of embedded wind and solar generation. Injections into Rough storage will also be unavailable for the next 12 months. While energy demand is expected to be lower than normal, it can now be seen that supply levels are also likely to be less constrained.

Maintenance schedules frequently change. Dates and volumes are not set in stone and it is likely additional maintenance will be carried out this year, particularly, beyond September. However, this analysis gives a clear indication of a lighter maintenance schedule compared to the previous year. Given that the UK coped perfectly well with last year’s summer maintenance, this year should see an increased chance of oversupply in the system, which could weaken market prices.

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Ross Moffat

Posted by on Friday, the 28. April at 15.55

Ross Moffat has been a part of the Market Intelligence team at Utilitywise since early 2014. His responsibilities include delivering Market Intelligence reports to clients and managing the Utility Insights Twitter account. Ross has a first class Honours degree in Business and Marketing from the University of Stirling.