ask icis: ukraine’s role in balancing the european gas market · 2020-05-19 · ukraine loses its...
TRANSCRIPT
Ask ICIS: Ukraine’s role in balancing the European gas market
Sergii Makogon, CEO Gas TSO of Ukraine, LLC
Sergii Oleksiyenko, CEO Ukrtransgaz
Ben Wetherall, Market Development Director, Global Energy ICIS
Aura Sabadus, Senior Journalist, Eastern Europe & Turkey, ICIS
Global gas market overview
Agenda
01
Central and East European market overview 02
The role of Ukraine in market balancing 03
2
Europe becomes the floor
• NBP falls below Henry Hub during April for first time since financial crisis
• On 2 January:
o NBP settled $1.88/MMBtu above Henry Hub
o EAX held premium of $2.91/MMBtu to Henry Hub
• On 12 May:
o NBP closes $0.33/MMBtu belowHenry Hub
o EAX bounces back to $.072/MMBtu above Henry Hub 0.000
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$/M
MB
tu
Global gas benchmarks-May 2020
EAX NBP Henry Hub Brent 11.5%Source: ICIS and NYMEX
European consumption crumbles
0.00
5.00
10.00
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25.00
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Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20
Bill
ion
Cu
bic
Me
tre
s
Germany Great Britain Italy France Netherlands SpainSource: ICIS aggregations
Consumption in April 2020 vs April 2019
• Europe – down 17%
• France – down 34%
• Spain – down 23%
• Britain – down 24%
• Italy – down 21%
• Germany – down9%
• Netherlands – down 9%
Global supply cut-backs in full swing
European pipe gas
• Equinor defers Q1-20 production to periods of higher prices
o Norway’s supplies to Britain in April fall to just 16% of the main mix
• Gazprom now using 166bcm export target for Far Abroad, down from 200bcm
o Jan-Apr export volumes already down approx. 20%
Global LNG liquefaction
• At least 21 US cargoes to be cancelled in June
o ICIS is forecasting a further 21 cargoes to be also cancelled for July and August
• Egypt’s Idku has shut in through Q2-20
o Eni running 33bcma Zohr field at approx. half capacity
European sink remains in play – but storage levels relatively full
• Low gas prices continue to support spark spreads
o Although power demand down too
• EDF’s French lower nuclear schedule could drive 14bcm of extra gas-burn
• Storage needs to play an even greater role
o Even as stocks already relatively full
Source: ICIS aggregations
6.28 0.66
21.76
6.97
0.42
9.62 0.97 2.901.86
7.05 0.66
5.15
5.28
1.58
5.37 0.50 1.101.36
0%10%20%30%40%50%60%70%80%90%
100%
European storage capacity by selected country
Stock level on 12 May (bcm) Capacity remaining (bcm)
0102030405060708090
100
Pe
rce
nta
ge
EU storage levels – 2018-20
2020 2019 2018
Ukraine loses its Balkan and Turkish transit, but TurkStream 1+2 remain underused.
Meanwhile, in Ukraine’s neighbourhood
01
Polish-Russian long-term contract expires, but flows unlikely to be diverted to Ukraine for now
02
Changing regional price dynamics encourage companies to store gas in Ukraine
03
.
7
Utilisation rates of transit pipelines via Ukraine and Turkey
8
Source: Transgaz TurkStream1 + Blue Stream – January, February 2020 (Source: EPDKTurkStream 2: January – April 2020 (Source: ENTSOG)
0 20 40 60 80 100
2018
2019
Utilisation rate of Trans-Balkan pipeline
Utilisation
0 20 40 60 80 100
TurkStream1 + Blue Stream (import Turkey)
TurkStream 2 (export to Balkans)
Utilisation rate of TurkStream1 + Blue Stream and TurkStream2
Utilisation
Russian Yamal transit via Poland to continue
9Source: Gaz-System
Long-term contract
expires on 16 May 2020
.
80%of Q3 ‘20 capacity booked by Gazprom in line with EU rules
0
20
40
60
80
100
120
Russian Yamal gas flows at Kondratki on Polish-Belarussian border (in million cubic metres/day)
2019 2020
Evolution of Ukrainian VTP and TTF front month prices
10Date Source: ICIS
0
5
10
15
20
25
Ap
ril
May
Jun
e
July
Au
gust
Sep
tem
ber
Oct
ob
er
No
vem
ber
Dec
emb
er
Jan
uar
y
Feb
ruar
y
Mar
ch
Ap
ril
May
2019 2020
Prices in €/MWh
UAVTP TTF
Since 2014, Ukraine had been
importing gas from European
hubs to cover domestic needs.
Ukraine was seen as a premium
market for companies looking to
make a profit
Falling hub prices in recent
months have been pressuring
UAVTP prices, which means that
the spread between hub prices
and Ukraine has been shrinking
With falling hub prices and
shrinking spreads, the rationale
for importing gas into Ukraine
has changed. Companies are
now looking to inject gas in
Ukrainian storages
Impact of gas exports to Ukraine on Slovak traded OTC volumes
11Source: Eustream, ICIS
0
200
400
600
800
1000
1200
1400
0
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
4500000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr MayTrades (MWh) Imports(million cubic metres)
➢ Increase in gas
exports to Ukraine
has been driving
liquidity on the
Slovak OTC market
➢ Are these the first
signs that Ukraine is
becoming a regional
hub?
15 May 2020
Sergii MAKOGONCEO of Gas TSO of Ukraine, LLC
GTSOU presentationOverview
Interconnection point capacities
Legend
Gas metering s tations located close to the borderentry IPs (mcm)
exi t IPs (mcm)
Gas pipeline
* after 1 June 2020 will be united in 1 VIP** TOT – temporarily occupied territories of Donetsk and Lugansk regions, Crimea
Belarus
RussiaPoland
Slovakia
Hungary
Romania
16,0
10,1
-92,392,3
17810
9,0
-
-
- --
--
-
16,8
150,7
TekoveVIP Bereg
Kobryn
Isaccea -1 / Orlovka-1
Uzhgorod - VK
Mozyr
Valuiky
SerebriankaDrozdovychi*Sudzha
Moldova
Oleksiivka24
19,1
Ananiiv23.80,18
98,43,96Grebenyky
15,898,4Kaushany0,6
MD Exit
Hermanowice*6.4
2442,5 Budince
Lymanske2,160,72
mcm/d
Prokhorivka**
Platove**
27,4Sokhranivka
Pysarivka
2
Border Border Border CustomsWarehouse
3
Shorthaul service
Discounted transmission between EU countriesShorthaul – is a special service, which allows for discountedtransmission between dedicated IPs with adjacent countries.UA Network Code specifies short-haul as «capacity withrestrictions».
The shorthaul service provides the instrument for traders and shippers to use the capacitiesunder very attractive tariffs, reaching the markets of Poland, Hungary, Slovakia, and Romania viaUkrainian GTS.
This product is only for transit services and does not provide access to the Ukrainian VTP andinternal market. Shorthaul can be combined with storing natural gas in UA storages in “customswarehouse” mode.
As of end of April 2020, therewere several tests of shorthaulfor transit between EU countriesand 0,3 bcm was injected intostorages.
To use shorthaul service you just need to:1. Conclude transportation agreement;2. Receive a separateshipper code for shorthaul product;3. Book monthly product or day ahead product (via nomination).
Customs warehouse
New opportunities for shippers
The Ukrainian and Hungarian TSOs,concluded new interconnectionagreement, which prescribes unitingexisting two IPs– IP Beregovo DN1400and IP Beregdaróc DN800 – into onesingle virtual interconnection point–VIP “Bereg”, which came into force ongas day 1 May 2020.
4
Virtual reverse flows and merger of IPs –implications for regional market integration
LLC Gas TSO of Ukraine initiatednegotiation with Eustream toconclude new interconnectionagreement, which prescribesuniting existing two IPs into onesingle VIP.
LLC Gas TSO of Ukraine and Gaz-System, in process of the concludingnew interconnection agreement, whichprescribes uniting existing IPs into onesingle VIP, which is expected to comeinto force on gas day 1 June 2020.
Example for first 10 days of May:Ukraine – Hungary = 278,4 mcmHungary – Ukraine = 194,7 mcmPhysical gas transportation = 83,2 mcm (difference on OBA between the TSOs)
5
Expectations of imports from EU hubs into Ukraine in 2020
In January-April 2020, natural gas imports from the EU reached 3.9 bcm.This is 1.4 bcm, or 59%, more than in the same period last year. That is also 26% more than the average in 2016-2019.
During the four first months of 2020, import portfolio is the following: Slovakia 2.4 bcm (+91% compared to the same period last year), Hungary 0.9 bcm (+26%), Poland 0.6 bcm (+28%), including virtual reverse– 0.38 bcm.
In April 2020, 1.131 bcm of natural gas was imported to Ukraine. This amount was exceeding the import volumes in April 2019 by 255 mcm. In particular, 264 mcm of gas entered Ukraine using short-haul via the following routes: Hungary – 64%; Poland – 21%; Slovakia – 15%.
In late April 2020, Eustream launched the new service which prescribes discount of up to 40% for bought capacities in Slovakia toward transporting gas to Ukraine for seasonal storage of gas and its subsequent export back to Slovakia. The gas injection season is just beginning, so this year Western traders will be able to use this product.
On April 16, LLC Gas TSO of Ukraine announced procurement of fuel gas for total volume of 300 million cubic meters targeted for non-residents. The purchase is planned in "customs warehouse“ regime in the underground storage facility, the expected value of 33 million euros.
3.9bcm
40%discount
Expectations of imports from EU hubs into Ukraine in 2020
6
For more information please check GTSOU web site:https://tsoua.com/wp-content/uploads/2020/03/How-to-be-a-client-2020-03-10_compressed.pdf
7
How to become a client Guideline
For new companies entering the UA market
8
Sergii MAKOGONCEO of Gas TSO of Ukraine, LLC
Thank you!
Chief Executive Officer
by Sergii Oleksiyenko
Ukrainian Gas Storages
Ukraine Gas Storage, mcmData provided on 01.05.2020
Available capacity - 14 bcmTotal - 30.9 bcm
2
2.4 1.2
0.3 0.3
1.2 0.6
0.1 0.1
1.2 0.6
0.2 0.2
Customs Warehouse
Short-haul
“CW” residents
“CW” non residents
“SH” residents
“SH” non residentsTotal reserves as
of 1.05.2020
Reserves as of 1.05.2020
Injected in January-April 2020
Injected in January-April 2020
16.6 2.3bcm bcm
Our Partners
Start Business with SSO:
Today, Ukrainian UGS services are used by companies from Austria, Estonia, Germany, Poland, Slovakia, the USA, France and Switzerland.
Visit our web-site and download instruction “How to Become a Customer”.
3
Non residents contracts
Non residents as of May 2020
Total concluded contract
Customers as of May 2020
Used short-haul
694
300
10
52
15
9 Used short-haul non residents
4
Tariffs Comparison
The short-haul product is up to two times cheaper even in comparison with alternative storage services in Europe.
Advantages of Ukrainian gas storages: fixed price, no auction procedures!
5
Tariff Methodolody
The cost-based approach includes two models: Cost Plus and RAB regulation. The two models differ by the margin calculation methodology.
Cost plus
Margin = fixed amount
Short-term tariff design
No return on investment
RAB
Margin = RAB x Rate of return
Long-term tariff design
Aimed at attracting capital
6
Financing of investment projects by external and internal sources
RAB regulation allows a company to attract investments and create value for itself by achieving superior preformance relative to regulatory target.
The key task is to introduce methodology, which will cover operating and investment expenses in tariff and will provide stipulated level of profitability.
Sources of investments
Based on approved investment program
Equity
External funds
1. regulatory period
2. regulatory period
RAB Methodolody:
For more details, please contact us:
Thank you! [email protected]
For Customers:
[email protected] Booking Services:
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