North Sea pipe outage reshapes Danish, Polish gas flows

Unplanned maintenance halving capacity on the pipeline that takes Norwegian gas to Denmark and Poland has led to a reconfiguration of flows and prompted unseasonal withdrawals from Danish storage.

Leaking internal valves at the Europipe II terminal will halve Baltic Pipe's capacity to 161 GWh/d until the end of the 12 August gas day, Danish system operator Energinet said on 2 August. Europipe II carries gas to Germany's Dornum terminal and a spur links it to Baltic Pipe, which crosses Denmark and ends in Poland.

Norwegian deliveries to Denmark at Nybro initially collapsed to 201GWh on 31 July, down from 317 GWh/d in the previous seven days. Nybro flows continued lower at 161 GWh/d on 2-6 August.

Denmark can easily meet its limited summer consumption — about 28 GWh/d in the past week — using domestically produced natural gas and biogas. But Poland consumes much more — 360 GWh/d on 30 July-5 August. The remaining Norwegian gas delivered through Baltic Pipe, plus sendout from Poland's Swinoujscie LNG terminal, are insufficient to meet this demand and support storage injections, so gas has to reach Poland from other sources.

Direct deliveries to Poland from Germany at the Mallnow interconnection point have risen in recent days, reaching 22GWh on 6 August, up from 5 GWh/d in the last week of July. But a high tariff for using the Yamal-Europe pipeline in Poland, as well as an additional entry fee into the Polish grid from the pipeline, limits the attractiveness of the Mallnow route, so flows there have not picked up enough to meet demand.

But Poland's receipts from Denmark at Faxe have held stable even as Denmark's Norwegian receipts have dropped (see Nybro v Faxe graph). Danish deliveries to Poland have been supplemented by an unseasonal switch to withdrawals from Danish storage. Danish storage has reacted flexibly to meet Poland's import demand during the Norwegian shortfall (see storage movements graph).

The stockbuild in Poland has continued, although it has fallen to 120 GWh/d since Europe II maintenance began from 212 GWh/d the week before. Polish storage sites are already about 90pc full. But firms active in Denmark and Poland may have decided to withdraw from Danish storage as these facilities are faster cycling, allowing scope for summer withdrawals while still making it possible to refill sites ahead of winter. Many European companies use Danish storage, including Polish state-controlled PGNiG.

Germany takes more Norwegian gas

Europipe II flows that would otherwise have headed to Denmark have been redirected to Germany's Dornum, pushing Germany to export more to its neighbours.

Receipts of Norwegian gas at Dornum have risen substantially since the drop in flows to Denmark (see Europipe II graph). The Danish day-ahead price has shot up relative to Germany's THE, reaching the highest premium on Argus record at nearly €5/MWh on Tuesday (see prices graph).

For Polish firms seeking to avoid the expensive Mallnow import route, the alternative of importing from Germany through Denmark comes with capacity constraints. German exports to Denmark have resumed after halting in February, but averaged just 15 GWh/d on 31 July-6 August. Little firm German exit capacity is available at the Ellund point and this capacity is frequently interrupted, market participants have said.

The surplus gas arriving in Germany has weighed on THE relative to other European markets. The German day-ahead price has remained consistently below the Dutch TTF in recent weeks. Gas-hungry Germany typically holds a premium to the TTF to attract gas, including LNG arriving in the Netherlands. But well-filled storage sites in Germany — these stood at over 90pc of capacity over the weekend — combined with low summer demand mean the country cannot absorb all the additional Norwegian supply. Besides an uptick in exports to Denmark and Poland, gross German exports to the Netherlands have stepped up in recent days. Imports from the Netherlands, as well as Belgium, have waned over the last week, while exports to Austria and the Czech Republic have risen.

By Till Stehr

Baltic pipe Nybro imports vs. Faxe exports €/MWh

Danish storage movements vs. net Baltic pipe flows GWh/d

Danish and German prices €/MWh

Europipe II deliveries split GWh/d