May 2015 9% Increase in Irish Wholesale Gas Prices Compared With May Last Year

May 2015 Business Energy Report Published by Naturgy Energy 

  • Irish wholesale gas prices in May (euro-equivalent) up 9% year on year, despite a 4% drop in the sterling price of gas for the same period (gas is traded in sterling)
  • Surge in LNG shipments and strong supplies from Russia exerting downward price pressure
  • Irish wholesale electricity prices in May down 2% year on year and down 7% on April  

Tuesday, 2nd June 2015: Irish wholesale gas prices in May were 9% higher on average year on year due to a significant weakening of the Euro against the pound over the last twelve months, according to the latest Wholesale Energy Market Report by Naturgy Energy. The company, which supplies gas to over 20% of Ireland’s industrial and commercial market, states that despite the year-on-year increase, the price of gas was down 6% month on month with a further softening in prices expected in the months ahead.

The drop in the value of the Euro against the Pound Sterling has masked a fall in prices in the UK wholesale gas market, the source from which Ireland purchases its natural gas. In May, the average day-ahead price on the UK NBP gas market – the contract for gas delivery for tomorrow – was 44.1p (sterling pence per therm), down 4% year on year and 6% month on month.

On the supply side, the report reveals that Europe continues to experience a surge in LNG (liquefied natural gas) shipments from the Middle East. LNG shipments into the UK have hit a two-year high, accounting for 14% of total gas supply during the first five months of the year, and 21% of supply so far in May.

Gillian Lawler, Senior Energy Analyst at Naturgy states: “We’ve seen significant increases in LNG shipments to the UK this year and this has exerted considerable downward pressure on prices. This trend toward greater LNG availability is due to weak Asian prices, with major buyers such as Japan and Korea now well supplied through long-term contracts. Qatar, a major supplier of LNG, is also set to increase shipments to Europe amid new supply sources in Australia and Indonesia coming online in Q3. Some Asian price recovery is expected this summer however, so that is something to watch.”

Commenting on the low gas storage levels that currently exist across much of Europe, Ms. Lawler notes that most European storage facilities are waiting for gas prices to drop further this year before replenishing inventories. An important factor affecting storage levels is cheaper Russian oil-indexed gas that is expected to become available in the third quarter. Storage levels are currently at 20% in the UK (compared to 68% last year), which is weakening the impact of the LNG supply glut somewhat as is a return in demand from the power sector and exports to Belgium.

Irish Electricity Update

The average wholesale price of electricity in the Irish market in May was 5.16 c/kWh – a decrease of 7% on the average in April and down 2% compared with May 2014. The month-on-month decrease was largely due to an increase in wind generation meeting demand and lower gas prices, which is significant as gas is the main energy source used to generate electricity in Ireland.

Total wind generation capacity in Ireland now stands at 2,911 MW. During May, wind energy accounted for 25% of overall electricity generation in Ireland (compared with 9% of electricity generation in the UK). Some 14,180 gigawatts of wind energy has been generated in Ireland since the start of the year, representing 23% of total electricity demand for the country during this period. Wind generation during the month of May reached a peak of 2,141 MW on the 6th of May when it accounted for 43.7% of demand at the time.