French winter gas supply at risk due to low storage reservation

PARIS (Reuters) -- France could face a tight gas supply in the 2017/18 winter period because suppliers do not have enough reserve storage capacity as required by law to meet demand if there is a prolonged cold snap, said major gas storage company Storengy.

Storengy, a subsidiary of French energy group Engie which develops and operates gas storage facilities, said that less that 50% of its storage facility had been reserved for the coming winter.

"To date, only 42.7 terrawatt-hours (TWh) of storage capacity has been sold for the 2017/2018 winter season, thus French storage capacity is less than 50% full," Storengy chief executive Cecile Previeu told journalists in Paris.

"The low level of reservations, if it were to remain, would not be enough to meet demand during a cold snap in winter," she said. "If by summer we don't have more storage reservations, we will not have enough reserves for winter," added Previeu.

France had to depend heavily on those storages in the past 2016/17 winter to keep heating and power generation going.

The situation was particularly acute in southern France, where the gas hub contract hit a record high in January as supply tightened after a force majeure disruption in Algeria and tensions in the global gas market.

Previeu said that if something similar happened with the current storage levels, France could face power outages.

In order to guarantee a security of supply during cold winter months, French gas suppliers are obliged by law to import and store gas to meet demand.

They must also reserve storage, and start injecting gas into storages months in advance as the overall process is slow.

In the past, suppliers could make their margins by buying cheaper gas during the summer months, pay and store it and then sell it on during winter when prices are higher, she said.

But gas prices have fallen and the spread between winter and summer prices have narrowed. A planned reform of the French gas storage sector collapsed last year, leaving suppliers with little incentive to continue to pay for storage.

Previeu said the French government must compel suppliers to respect their obligations to reserve storage, while attempts to revive the reforms continue.

Storengy, which operates 21 storage sites in Europe including 14 in France, recorded 2016 revenues of 1 billion euros. It specializes in underground natural gas storages using salt or rock caverns and depleted oil and gas fields.

Reporting by Bate Felix; Editing by Sudip Kar-Gupta

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