LONDON (ICIS)–Despite high storage levels and new LNG terminals, Germany is likely to have to rely on below-average demand this winter to stay comfortably supplied, ICIS analysis shows.
Current German storage levels are at 68% and need to get to 85% by 1 October to reach the government’s storage targets.
This will almost certainly happen as summer contracts have slumped to wide discounts to the THE Winter ’23, providing a strong financial incentive to inject.
Between 18-24 April, net German injections averaged 46mcm/day. Should this rate continue, fullness levels of 85% would be reached by the end of July. In reality, this may happen much sooner as below-average temperatures in April, which kept a lid on injections, are expected to give way to above-average temperatures in May.
However, risks remain in the winter ahead. While summer contracts have recently slumped, the ICIS THE Winter ’23 contract settled on 25 April at €56.200/MWh, up from €51.200/MWh a month earlier.
This reflects the fact that storages alone will not keep Germany supplied through the winter. To start the winter with 85% full stocks and end it at 45% would leave an average of 64mcm/day available to withdraw.
If we compare this with the 2017-2021 average winter demand of 342mcm/day, a 278mcm/day shortfall remains.
In other words, high storage levels will not keep Germany from being heavily reliant on imports this winter.
The country’s main suppliers are Norway, the Netherlands and Belgium, all of which ramped up exports last winter close to maximum capacity.
Norway increased exports by 46% in Winter ‘22 compared to the 2017-2021 winter average to 121mcm/day while the Netherlands increased exports by a whopping 140% to 85mcm/day.
Belgium, which only started being a regular supplier to Germany in 2022, averaged 65mcm/day over the winter months.
This adds up to 271mcm/day which, when domestic production of 5-7mcm/day is added, would roughly cover the 278mcm/day internal demand shortfall in an average winter demand scenario.
However, this would leave export demand to be covered entirely by German LNG terminals. Roughly 37% of flows from the Netherlands and Belgium to Germany are transit flows which are then exported to Germany’s eastern neighbours. Last winter, 37% of Dutch and Belgian flows added up to about 55mcm/day.
Currently, Germany’s three LNG terminals have a maximum sendout capacity of 37mcm/day, although rates are yet to surpass 24mcm/day. Even if sendout reaches maximum capacity levels, this is unlikely to cover export demand in an average winter demand scenario.
To help bridge this supply gap, German demand will likely need to stay below-average in Winter ‘23. New FSRUs due to come into operation during the upcoming winter would also help supply, however these terminals normally take a couple months to reach meaningful sendout levels. In the meantime, demand savings will be crucial to keep the country comfortably supplied.
Source: icis
