The widening Greek day-ahead price discount to Italy's PSV may strengthen the incentive for shippers to move gas from Greece into Italy through the Trans-Adriatic (Tap) pipeline.
The Greek VTP day-ahead discount to Italy's PSV widened to €14.45/MWh on 16 October, marking the widest point for the differential since the start of the month. The Greek-PSV everyday basis market averaged -€11.08/MWh on 1-15 October, strengthening the economic incentive to import gas into Italy, even on a short-term basis (see graph).
And forecast windy conditions in the Adriatic could keep sendout from Italy's offshore LNG terminals subdued next week, potentially bolstering demand for pipeline imports and further supporting the attractiveness of additional supply from neighbouring markets.
The PSV hub premium has continued to attract pipeline inflows to Italy from neighbouring hubs, but a significant premium to Greece offers an attractive arbitrage opportunity. The PSV day-ahead price's premium to Austria widened to €2.015/MWh on 16 October from an average of €1.64/MWh earlier this month, while its premium to Germany increased to €2.955/MWh from €2.659/MWh. In contrast, Italy's premium to France narrowed to €4.76/MWh on 16 October from an average of €4.945/MWh on 1-15 October (see graph).
TAP flow reversal creates new path to Italian market
Bidirectional flows at the TAP's Nea Mesimvria interconnection have created a commercially viable route for Greek gas to reach Italy, but limited available capacity means it may remain a marginal supply option, a market participant told Argus.
The Nea Mesimvria interconnection point became bidirectional on 1 October, opening a route for gas exports from Greece to Italy while also allowing reverse flows into the Greek market. The change enables companies to book forward entry capacity at Nea Mesimvria, combined with exit capacity in Melendugno in Italy. The Nea Mesimvria interconnection has roughly 5.56 GWh/d of firm technical entry capacity, equivalent to around 530,000 m³/d, of which 5 GWh/d was allocated under TAP's 2021 market test, leaving only around 560 kWh/d available for booking. TAP can also offer up to 24 GWh/d of day-ahead interruptible capacity, equivalent to roughly 2.3mn m³/d or 850mn m³/yr, subject to system availability.
TAP has received continuous day-ahead bookings for both firm and interruptible capacity since 4 October, indicating market interest in the new entry point.
The cost of transporting gas from Nea Mesimvria to Melendugno on a day-ahead basis is around €5.3/MWh, based on Argus' calculations, with no usage charge included. Greece-to-Italy exports are currently an attractive arbitrage opportunity, and domestic Greek licence holders can access the route without the need additional approvals, a market participant told Argus.
