UK summertime blues: coronavirus pushes gas market to deadlock Report

Insight 01 May 2020

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Report summary

The UK gas balance has reached a deadlock for the summer. With weak demand persisting and UK production holding up, the market space has evaporated. Norwegian flows have already dropped to a floor but LNG imports into the UK's South Hook terminal have climbed as LNG exporters struggle to place cargoes. NBP has collapsed against continental benchmarks in order to incentivise flows out of the UK - but deeper discounts will be needed for even higher flows. The biggest losers exposed to the deteriorating UK summer outlook will be LNG exporters hoping to place cargoes into the UK market. There simply won’t be space. Consequently, the UK’s effective regasification capacity will be capped at 50% through the summer. LNG exporters desperately looking for market are fast approaching another brick wall.

Executive Summary
Introduction
The NBP discount to TTF deepens
UK gas demand is under pressure
Exports are reaching their limits
With space for storage injections very limited
UK domestic gas production is holding firm – so far
with Norwegian piped suppliers and LNG importers adapting
but the space for both Norway and LNG will shrink further
Has all of the UK market space already run out?
Conclusions

Tables and charts

This report includes 12 images and tables including:

NBP-TTF differential
UK gas demand
UK gas infrastructure

Pipe exports - Ireland (Moffat Interconnector)
Net pipe imports - IUK & BBL
Pipeline tariffs – IUK & BBL
UK storage inventory
UK gas production
UK gas production against short-run marginal cost (SRMC) of production and total annual opex
Daily pipe imports from Norway
Daily LNG send-out
Summer UK gas supply-demand balance