LONDON: Poor demand for gas storage in west Europe is forcing operators to offer new financial sweeteners and flexible terms to lure customers put off by weak profits and high fees.
A series of yearly gas storage auctions held in the Netherlands, France, Belgium and Austria over the past weeks ended with space to spare and prices well below expectations, showing the once-buoyant market had turned sour.
“It is a general trend in Europe that seasonal storage products suffer from competition with, among others, low summer-winter spreads at the trading places,” said Rudy van Beurden, communications manager at Fluxys, Belgium’s gas network and storage operator.
Gas suppliers and traders typically buy gas in summertime when prices are low due to weak demand and pump it into underground storage sites until the winter, when the fuel can be sold at a premium.
But the spread between the two seasons’ prices has been narrowing in all of Europe’s trading hubs due to rising summer prices as traders factor in the weak outlook for liquefied natural gas (LNG) supply and maintenance schedules.
In the Dutch TTF market, continental Europe’s most liquid gas market, the discount for buying gas in summer 2013 over selling it in winter 2013/14 has more than halved over the past year from around ¤3.65 per megawatt hour to ¤1.25.
Dutch gas storage operator GasTerra failed to sell any storage capacity in the second leg of its yearly auction held on February 13 as the average auction price cleared at 1.47 euros, below the company’s set reserve price. Belgium’s Fluxys was also dealt a blow in its latest auction held over the month of February when no slots were booked at its Loenhout storage site.
But the network operator has already received clearance from the country’s energy regulator to offer additional long-term contracts between 2-10 years following stronger appetite for larger contracts in previous auctions.
The regulator also approved more flexibility in terms of when auctions are held and how much capacity is auctioned each time, new services which Fluxys hopes will prompt more interest in storing gas.
Abu Dhabi’s national energy company TAQA, which will open one of Europe’s largest gas storage facilities in the Netherlands in April 2014, is wooing customers with another service: using gas stored at its site as collateral for financing from selected banks. Rabobank, ABN AMRO, Citi and BNP Paribas signed an initial agreement earlier this month for gas stored at the Bergermeer facility to be used as collateral for financing, giving customers a stronger working capital position. Reuters
