Baltic gas demand up in July for first time since war

Combined Finnish and Baltic gas consumption edged up by roughly 1pc on the year in July, the first increase since before the start of the war in Ukraine.

Overall consumption rose to 2.1TWh from 2.07TWh in July 2022. Finnish consumption increased for a fourth consecutive month, more than offsetting another steep drop in Lithuania (see graph).

Finnish consumption jumped by 22pc on the year to 900GWh, although this was still lower than in July 2020-21.

Gas-fired generation edged lower year on year in Finland, to 158MW from 188MW, as nuclear output jumped to over 4.2GW from 2.5GW thanks to the commissioning of the 1.6GW Olkiluoto 3 unit in April. This nuclear output increase meant an aggregate uptick in Finnish power production by 1GW year on year.

Gas-fired output was up slightly in Latvia but down in Lithuania, with aggregate power output down in Estonia too (see table).

Given the year-on-year fall in Finland's gas-fired generation, the overall increase in gas consumption was probably driven by industry. Paper and pulp mills in Finland, by far the country's most energy-intensive industry, posted several market messages over the month noting extended periods of high gas consumption.

Finnish gas consumption has risen for four months in a row, suggesting a recovery in the country's industrial gas use. That said, consumption still remains well below the average of previous years, suggesting some potentially permanent demand destruction.

In Lithuania, by contrast, aggregate consumption has continued to fall year on year across the summer. The country's largest consuming industrial user — ammonia producer Achema — appears to be running its plants below capacity despite previous expectations it would ramp up from June. Domestic fertiliser producer Eurochem last month said it could close its plant at Lifosa from October, suggesting domestic ammonia demand could remain weak. And in the EU more generally ammonia imports have been cheaper than domestic production, discouraging strong output in Europe.

The average gas price on the GET Baltic exchange edged up to €36.81/MWh in July from €36.31/MWh in June, but there was significant price variation between different countries — the Lithuanian price index fell by 7pc, while the Finnish index jumped by 10pc, the exchange said.

Traded volumes stepped down to 358GWh from 576GWh in June. The common Latvian-Estonian market area accounted for 46pc of traded volumes in July, while Lithuania made up 28pc and Finland the remaining 26pc. Just 4GWh was sold on a month-ahead basis, with the rest sold as daily products.

Balticconnector return eases Finnish tightness

The end of maintenance on the Finnish-Estonian Balticconnector since 31 July has allowed the Finnish market to come back into balance.

Finnish system operator Gasgrid Finland warned several times in June and July that if the market's balancing position remained short for a second or third consecutive day, balancing prices would have to increase "remarkably".

With no transmission capacity to Finland from Estonia available over 26 June-31 July, and just 5 GWh/d available in the other direction, the Finnish system had few balancing options. Sendout from the Inkoo LNG terminal in Finland also slid to 29 GWh/d in July from 58 GWh/d in June.

LNG sendout bounced back to 65 GWh/d on 1-14 August following the end of maintenance, although sendout dropped to 25GWh on 15 August because of unplanned constraints caused by a delayed cargo arrival. Gasgrid had expected the maintenance to be lifted by midday on 16 August, but has provided no update since.

Lower nuclear availability in Finland because of scheduled maintenance at the 507MW Loviisa unit 2 on 20 August-6 September could increase the call on gas-fired plants later this month. And unplanned works at the Swedish 1.4GW Oskarshamn 3 nuclear plant owing to a problem with its turbine system will lower availability by 270MW for around five days from 9 September, while the 1.11GW Forsmark unit 2 will be off line on 3 September-14 October.

By Brendan A'Hearn

Total July gas consumption by country GWh