France Urges Gas Suppliers to Boost LNG Imports

Published Dec 5, 2013 2:17 PM by The Maritime Executive

Gas supplies at the southern French hub of Marseille are running dangerously short on a dearth of liquefied natural gas (LNG) deliveries, cold weather and low stocks at the onset of winter, pushing prices there to among the highest in the world.

It has prompted French gas grid GRTgaz to call on utilities to raise LNG imports into the southern Fos terminal urgently to avoid a supply crunch, it said on its website.

This comes after French energy officials, the regulator and GRTgaz repeatedly voiced concern over the past few months about low gas stocks in France ahead of winter. Cold weather across northwest Europe drained storage last year.

"The gas market in southern France is facing major tensions at the start of the winter," France's energy regulator CRE said. "The CRE reminds market players of their responsibilities."

A spokeswoman at GDF Suez, France's main gas supplier, said the group would ensure its clients are supplied this winter.

The supply issue is a cause of concern for heavy gas industrial users in the south of the country, who could be cut off in the event of a supply crunch due to a cold snap, said Claude Conrard, head of oil and gas at Uniden, the lobby group for energy-intensive industrial businesses.

"Levels of stored gas is insufficient and is particularly worrying," Conrard told Reuters. "So much so that authorities are asking suppliers to bring in more LNG at the Fos terminals."

LNG flows at Fos' two import terminals were down 8.8 percent in November against the same month last year, port data shows.

Gas storage levels in France are 66 percent full, against 72 percent at the same time last year, according to Gas Infrastructure Europe data, following a poor injection period.

"Storage levels at the start of the winter were not 100 percent full but only about 80 percent in the south," an official source said. "There is no immediate risk of shortage but people are protecting themselves for January and February which is why prices are rising."

France is divided into three gas hubs, but pipeline bottlenecks between the Northern hub called Peg Nord and the southeastern Peg Sud prevent Norwegian and Russian pipeline imports from flowing to the south of the country.

This is why the southern gas hub relies heavily on LNG imports from the Tonkin and Cavaou terminals in Fos near the Mediterranean port of Marseille.


But problems at an LNG terminal in Algeria, one of the main gas suppliers for the region, have recently caused deliveries to collapse, worsening the already tense supply situation.

Delays in the maintenance of a fourth liquefaction train at the Algerian LNG export terminal of Skikda, near the Tunisian border, are a key factor, France's energy regulator CRE said.

"It's specifically this terminal which supplies the Fos Tonkin port," a source close to the matter said. Algerian state-owned energy group Sonatrach, which operates the terminal, declined to comment.

The spread between Peg Nord and Peg Sud day-ahead gas prices reached a record of 12.29 euros per megawatt-hour (MWh) on Dec. 3 on the French gas bourse Powernext.

"It's the main factor, which combined with others, means that the situation is indeed quite tense, and this is reflected in the high prices.

Gas prices in Asia, which are the world's highest since the Fukushima disaster, are around 40 euros per MWh. Southern French gas prices briefly touched 41 euros this week, while they were around 29 euros in the north.

While the French authorities currently have little leverage to force gas suppliers to boost their storage levels, the government is working on a decree to force utilities to increase the gas they store ahead of the winter.

"The aim of the decree is to be in a situation to be able to withdraw 1,700 gigawatt hours per day," Conrard said, adding that the current withdrawal capacity was two thirds of that. 

By Muriel Boselli and Michel Rose (C) Reuters 2013.