Despite a decline in global coal demand for the second consecutive year, international steam coal prices doubled in 2016. This massive rise may seem paradoxical; in fact, it responded to market fundamentals: a tightening of the international market due to an unexpected surge in Chinese coal imports and the inability of exporters to meet this sudden increase. The surge in Chinese imports was not due to increasing demand – Chinese coal consumption in 2016 fell for the third year in a row– but to domestic production restrictions mandated by the Chinese government from April 2016. To remove excessive and outdated capacities in the domestic coal sector, that weighed on domestic coal prices, the government required coal mining companies to cut operating days from 330 to 276 a year. The new regulation led to a fall in coal production, shortages of coal and a steep increase in domestic coal prices, forcing power utilities to turn to the international market. However, after five years of low prices and reductions in investment, exporters were not able to respond to this sudden demand and international prices increased to clear the market.
CEDIGAZ Insights - Page 9
Underground Gas Storage in the World – Part 2: Storage projects
Highlights from the latest update of Cedigaz’ Worldwide UGS Database.
Only 25 bcm of working capacity is under construction
The capacity currently under construction is limited. At worldwide level, there are 48 storage projects[1] under construction adding 25 bcm of working capacity. This includes only 15 new storage sites (12 bcm) and 33 expansions (13 bcm). Again, this is lower than last year’s report (58 projects adding 36 bcm of working capacity) and previous ones. This is partly due to the commissioning of storage facilities in 2016, but also to cancellations of projects. Most of the projects under construction will be completed by 2020/25. All regions, but Central and South America, participate in the additions to storage capacity currently under construction. It is worth noting that Europe ranks first, but capacity under construction is concentrated in Italy, where the storage regulation is much more favorable than in other European countries. The CIS ranks second with expansions and new facilities built in Russia. The Middle East and Asia-Oceania account for 23% and 18% of the world additions. The shift of storage investment to new emerging and growing gas consuming countries started at the beginning of the 2010s and is expected to dominate the next 20 years. The additions to withdrawal capacity are dominated by Europe reflecting the focus towards highly flexible storage in the region.
Underground Gas Storage in the World – Part 1: Current capacity
Highlights from the latest update of Cedigaz’ Worldwide UGS Database.
No significant changes compared with 2015, except in Europe
As of end 2016, there were 672 underground gas storage (UGS) facilities[1] in operation in the world, representing a working gas capacity of 424 billion cubic meters (bcm), or 12% of 2016 world gas consumption. The number of storage facilities has decreased (680 UGS in 2015), mainly due to closure/mothballing of UGS in the United States and Europe. However, the global working capacity has slightly increased (+11 bcm) driven by expansions in the Commonwealth of Independent States (CIS), the Middle East and China. In Europe, storage capacity has continued its decline. Working gas capacity decreased by 5.8 bcm due to the closure of storage facilities in Germany, Ireland and the UK. The temporary closure of the Rough depleted field was confirmed as a permanent one in June 2017. This sharply reduces the UK storage capacity, and especially its seasonal storage capacity.