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UK LNG gas grid sendout reaches post-Fukushima moratorium high

London — Natural gas supply through regasification at the UK's three LNG terminals on Wednesday reached the highest level since the aftermath of the Fukushima disaster in 2011, aided by rising demand as wintry weather sweeps the country and an unplanned Norwegian outage reducing UK gas imports.

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Combined sendout from the Isle of Grain and the two Milford Haven terminals -- Dragon and South Hook -- aggregated to 92 million cu m according to S&P Global Platts Analytics. This surpassed the most recent high of 90 million cu m set on December 5, 2018, reaching levels last seen in May 2011, two months after the Japanese nuclear disaster at Fukushima, when LNG imports to Japan rose.

The South Hook terminal led the way, providing 41.5 million cu m, while Dragon and Isle of Grain supplied 22.8 million cu m and 27.7 million cu m, respectively. The South Hook terminal received five Qatari LNG vessels during March, discharging 696 million cu m of natural gas equivalent, and is set to receive another four Qatari cargoes in the first half of April, shipping sources said.

Overnight temperatures close to zero in the UK have brought snowfall in northern areas, and with it greater local distribution zone domestic demand tantamount to an above-average winter day. Allocated demand for Wednesday amounted to 315 million cu m, and is set to remain at this level for Thursday's gas day.

The UK's National Balancing Point virtual trading hub received greater interest in day-ahead contracts as shippers sought to cover the unexpected demand. Platts assessed the contract up 4.25% at 33.10 pence/therm on Wednesday, recouping losses following a near two-year low as April delivery began. Intra-day valuation of the NBP day ahead showed a continued rise, up 0.60 p/th to 33.70 p/th.

An unplanned outage at the Norwegian Kollsnes gas processing plant also prompted spot LNG interest in the UK. The outage primarily affected deliveries to the UK through the Langeled pipeline that makes landfall at the UK's Easington natural gas terminal. After starting April at maximum flow, deliveries amounted to 60 million cu m/d on Wednesday, approximately a fifth lower, with Norwegian operators likely choosing to curtail shipments to the UK due to the daily gas balancing regime in the country, unlike the hourly equivalent in continental Europe.

AFTER AND BEFORE

The current level of sendout is nearly two-thirds of the 150 million cu m/d combined technical capacity of the UK's LNG terminals.

Last winter, LNG supply delivered into the UK gas system topped multi-year highs, reaching 8.17 billion cu m of regasified natural gas between October and March, over 3 1/2 times higher on the year.

However, in the gas winter prior to Fukushima -- between October 2010 and March 2011 -- LNG supplied 12.90 billion cu m to the UK gas grid, and continued to deliver an average of 70 million cu m/d for the subsequent gas summer.

The Fukushima disaster -- in which a high-magnitude earthquake triggered a tsunami that devastated the Daiichi nuclear power plant, causing a meltdown of three reactors at the site -- initiated an immediate moratorium on nuclear power generation. Japan sought alternative fuels for power production as a result, drawing Middle Eastern LNG supply away from Europe.

Following strict appraisal of safety and disaster response standards, Japan has incrementally been restoring nuclear power to its generation mix in a bid to meet global emissions targets and phase out fossil fuel-fired production. This has contributed to softer LNG demand in Japan, and a weakening of the Platts global JKM benchmark price for Asian spot LNG.

JKM has recently fallen below NBP for the first time in over three years. Average JKM and NBP month-ahead prices from April 16 for May LNG delivery equate to $4.61/MMBtu and $4.71/MMBtu, respectively.

-- Neil Hunter, neil.hunter@spglobal.com

-- Edited by James Burgess, newsdesk@spglobal.com