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BBL gas capacity sells as NBP opens premium

06 Nov 2017 18:48 GMT
BBL gas capacity sells as NBP opens premium

London, 6 November (Argus) — BBL natural gas pipeline capacity was bought at auction today for January-March, after the UK's NBP first-quarter 2018 contract moved to a sufficiently wide premium to the Netherlands' TTF.

Shippers booked 14.4 GWh/d of firm entry capacity for delivery to the Bacton terminal, well below the 193 GWh/d on offer. There has previously never been any demand for short-term BBL bookings.

BBL capacity was mostly fully subscribed with long-term bookings until December last year, when Dutch firm Gasterra's contract to supply UK utility Centrica expired, alongside the corresponding pipeline space.

Short-term BBL capacity bookings were not required last winter, as other sources of supply stepped up during cold periods. The Interconnector link is fully booked until October next year — this subscribed capacity is considered a sunk cost.

But the NBP first-quarter 2018 market's premium to the TTF has exceeded 4p/th, which could be enough to cover most of the costs of booking quarterly capacity.

The cost of exporting to the UK through BBL will fall from 1 January, when the Julianadorp exit fee is removed and the pipeline is integrated into the TTF market area. UK regulator Ofgem approved the tie-up at the end of September.

The integration should improve arbitrage opportunities between the NBP and the TTF, and reduce the need for Dutch system operator GTS to take balancing action.

Capacity on the BBL route was auctioned for the first time at just Bacton on the Prisma platform, rather than at Julianadorp as well. There was no uptake of quarterly BBL capacity for April-September in today's process.

4843812

BBL costs from Netherlands to UK*
€/MWhp/th
Total1.7154.442
BBL day-ahead in Jan-Feb 170.7882.039
BBL commodity charge0.1090.282
UK commodity charge winter 170.6951.800
Bacton entry fee0.1240.320
*exchange rate €1/£0.883639

NBP-TTF first-quarter 2018 basis p/th