Storage Operators Face Tough Times: Timera

Gas storage operators across Europe are confronting a harsh reality, as the seasonal price spread at the Dutch TTF hub has fallen from levels above €10/MWh a decade ago to below €2/MWh in the last five years, leaving operators struggling to cover fixed costs, let alone earn any return on capital.

That’s the conclusion of a recent blog by Timera Energy consultants Olly Spinks and David Stokes.

Despite some recovery in spot gas price volatility in 2016, the ongoing weakness in seasonal spreads has caused operators including Uniper, RWE, OMV and Engie to book impairment charges relating to seasonal storage assets, with many European operators reviewing the future of such assets.

Timera believes that many are losing patience with biding their time. Instead it foresees a growing shift towards closing, mothballing, or selling such assets. However, it notes an aborted sale in 2016 of RWE storage assets illustrates the challenges of selling in the current market. The June 12 blog can be read at http://www.timera-energy.com/options-confronting-gas-storage-owners/

It comes as Eurogas and eight other industry associations this week made the case for storage as the basis for storing not only natural gas in future, but also biogas, and also hydrogen produced at future ‘power to gas’ units. The nine say that recent changes to the EU draft 'Renewable Energy Directive II' intended for the post-2020 period represent “a step forward in recognising the potential for renewable gas in a renewable energy.” The draft directive is currently going through its first reading in the European Parliament.

But that’s for the future, whereas today’s storage owners or developers face decisions now. Among the latter are InfraStrata which needs to find a financial backer or buyer for its storage project or else run out of money by August; its directors face a more immediate challenge.

Mark Smedley