German gas grid operators 'confident' on winter supply despite Nord Stream 2 - S&P Global

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Highlights

Optimism on full storage, L-gas to H-gas conversion work

Redirecting flows can compensate for Nord Stream 2

Pipeline remains incomplete with 150 km left to lay

London — German gas grid operators are "confident" that the country's gas supply is secure for the upcoming winter despite the Nord Stream 2 gas pipeline not being available, industry body FNB Gas said in its winter outlook published Nov. 9.

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FNB -- representing 11 regional gas grid operators -- said flows can be redirected via alternative routes to offset the volumes that had been expected to come to Germany via Nord Stream 2.

The almost complete Nord Stream 2 was meant to come online at the end of 2019, but the threat of US sanctions against companies working on laying the pipeline saw main contractor Allseas halt work in December last year.

The 55 Bcm/year pipeline remains incomplete with a little over 150 km left to lay in Danish and German waters and no clear sign on when and how work will resume.

"It is the view of FNB that the absence of gas volumes that should have been available to the market with the completion of Nord Stream 2 will not impact on supply security," it said in the outlook.

"Redirecting gas flows can compensate for the absence of Nord Stream 2," it said.

FNB said its optimism about the coming winter season -- which was also the case last year -- was in large part due to the robust level of gas storage in Germany.

"The storage facilities are around 95% full and there is enough transport capacity from numerous sources to secure gas supply even during longer cold spells," it said.

According to Gas Infrastructure Europe, Germany currently has some 214 TWh of gas in stock -- or the equivalent of around 20.2 Bcm.

That is the highest level of stocks in the EU.

Balancing gas

FNB said that in order to cover peak demand as well as for balancing purposes, transmission system operators and market area managers had also contracted gas products on the market as a "precautionary measure."

It said they would use "tried-and-tested" hedging instruments (long-term options and short-term balancing services) to cover high demand and for balancing.

It added that conversion of L-gas to H-gas sites remained on track despite a slowdown in work during the first lockdown in Germany caused by the COVID-19 pandemic.

"Delays in converting from L-gas to H-gas gas caused by the first lockdown were almost completely offset ahead of the deadline for this winter outlook," it said.

Germany has a number of projects underway to convert L-gas supply areas to H-gas ahead of the phase-out of gas production from the giant, L-gas producing Groningen field in the Netherlands in mid-2022

FNB has warned previously that the fall in L-gas production was one of the biggest challenges facing the German gas industry.

It said in 2018 that a total of Eur7 billion ($8.5 billion) would be spent on projects to ensure German gas supply security to 2028.

The current switchover concept in Germany allows for additional switchover areas to be converted ahead of schedule, which will mostly affect industrial gas customers.

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German gas grid operators 'confident' on winter supply despite Nord Stream 2 - S&P Global
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