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European natural gas storage facilities face closure on weak economics: industry

Platts

2017-01-27

A number of European gas storage facilities could face closure in the coming years given the weak economics for operating sites across the continent, industry leaders said late Wednesday.



At the European Gas Conference in Vienna, officials from storage operators in Germany and Austria said the summer-winter spread -- historically wide to incentivize injections in the summer and withdrawals in the winter -- has narrowed considerably in recent years.



"I'm surprised we haven't seen more closures," managing director of gas storage at Austria's OMV, Erich Holzer, said.



"There will be more closures in the future -- summer-winter margins are too low to keep these storage facilities [operational]," Holzer said.



Head of energy storage Austria at Germany's Uniper Michael Schmoltzer echoed his view.



"The economics say that you have to close your storage sites that do not cover their costs," Schmoltzer said.

 

"The summer-winter spread is putting us under pressure," he said.



The current spread between TTF day-ahead prices and summer 2017 is just over Eur3/MWh, according to Platts assessed prices on Wednesday, but has been as low as Eur1/MWh in recent months.



The bleak outlook has been somewhat tempered by a strong use of storage across Europe so far this winter.



Commercial Managing Director of Innogy Gas Storage Michael Kohl said Europe was on track for its gas storage levels to drop to record lows by the end of the winter having started the season at record highs.

 

"Very low prices in summer 2016 drove the filling," he said, adding that levels were now around 50%.



Asked whether there was a risk of European gas storage levels running dangerously low in the event of a continued cold winter, Kohl said it remained to be seen.



"It is too early to say if there will be an issue, and depends on the type of storage," he said, pointing to a more reliable withdrawal performance for salt-cavern storage facilities.



But OMV's Holzer said storages could go to their lowest ever by the end of the winter of under 11% full. 

 

Platts


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