LNG deals struck to aid gas-starved southern France
A natural gas supply crunch has turned a quiet corner of southern France into a premium market rivalling Asia in terms of attractiveness for global liquefied natural gas (LNG) shipments, with several due to arrive over the coming weeks, traders said.
France’s gas grid operator GRTgaz said on Friday that low LNG deliveries to the Fos-sur-Mer terminal in the country’s south had led to tight supply, prompting heavy reliance on stored reserves to meet winter demand.
The situation, which began in November, has led to a spike in the gas price in France’s southern hub, which touched its highest level since December 2013 at 40 euros ($42.57) per megawatt-hour this week, far outstripping Asian spot LNG prices for February delivery which are trading at a 10 euro discount.
While a GRTgaz spokesman declined to comment on why LNG deliveries were so low, traders cited production stoppages at Algeria’s Arzew LNG export facility that supplies France, high Turkish demand and the fact that rising Asian prices have pulled supplies out of Europe.
A trader said that with prices at France’s southern hub still competitive in February and March, several cargoes had been sold into the market, the first of which is due to arrive towards the end of the month.
“We’ve got southern France and Spain now as globally premium gas markets competing with (northeast Asia), and that’s creating a demand spike in the Atlantic,” a trader said.
“Multiple deals have been done that will deliver LNG shipments into Iberia and southern France that will start from late January and go on into February,” he said.
The deals should help to alleviate the supply crunch, which is expected to deepen next week when temperatures in the south of France are forecast to reach near record lows.
Freezing winter weather has put pressure on power supplies across Europe in recent weeks, prompting Greece and Bulgaria to introduce bans on power exports to avoid blackouts at home.
GRTgaz said underground gas storage sites were at their lowest levels for this period of the year compared with the last five winters.
“With no LNG arrivals at Fos-sur-Mer in the short term, withdrawal from storages remain nevertheless the only solution to meet the immediate needs,” GRTgaz said on Friday.
GRTgaz urged market players to respect the recommended minimum daily gas withdrawal limit so as to have enough supply until the end of winter.