Wednesday May 22, 2019

With 16 tankers now booked for May, this month has already marked more LNG coming to the UK in 2019 than the whole of last year. With that, capacity at the terminals is dwindling. Across the three terminals – South Hook, Dragon and Isle of Grain – there is enough capacity to store 1.25BCM of gas, a similar amount to all the UK’s Medium Range gas storage. However, despite the strongest average daily sendout since 2011, storage at the three terminals is rapidly filling and there is limited scope for demand to increase to absorb further LNG on to the grid.

The gas market remains well supplied with demand continuing to edge lower. The plentiful supply is largely thanks to LNG which in recent weeks has been making up an increasing share of UK supply to over 30%. Average daily sendout for the last month has been the highest since 2011.

Of the 16 tankers that are booked so far this month 12 have gone to South Hook which has enabled the terminal to send out at over 50MCM/d. Of these tankers seven have been Q-Flex carrying around 126MCM of gas and five have been Q-Max carrying 155MCM. With sendout at 50MCM/d it is getting through a Q-Flex every two days, and a Q-Max every three. This means stock at the terminal has grown from 35% full at the end of April, and is expected to be over 90% full at the end of this week, with three tankers set to arrive in the next six days.

 

Sendout, other than boil off, from the other two terminals has largely stopped since 14 May. With Dragon 64% full, and having only a third of the capacity it will have to increase flows in order to accommodate a tanker. Following the arrival of the Ougarta, from Algeria, into the Isle of Grain this week the terminal is going to be over 90% full and therefore will have no room for further cargoes without increasing withdrawals.

 

Therefore, if the UK is going to receive similar amounts of LNG in the near future sendout is going to have to increase. How much potential demand there is to absorb this gas is limited, with the interconnector running at booked capacity and storage already 50% full. The potential for further and prolonged oversupply in the gas system could lead to more declines in short-term energy prices. The front-month gas contract has already dropped to its lowest level in three years at 30p/th.

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