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Good point, spud.
I have seen it suggested in my research that when confronted with a potential supply or demand shock (like the Beast from the East, or a supply outage like at Rough in 2006), that a gas supplier like Centrica could use gas and weather derivatives for hedging purposes. They can, and these are becoming more liquid and traded. But, it begs the question of how will the nearby contract for spot delivery get physical delivery? Surely it can't come from LNG in the very short term, or from increasing North Sea gas output (already running at peak supply). It must come from rapid cycle gas storage.
Several times JW has mentioned the closure of Rough being the catalyst for Islandmagee.
I've been doing some digging and found this article from 2016
One paragraph is of particular interest to us
"If the UK loses Rough capacity it will have a knock on impact for the utilisation and value of other storage assets. Other storage facilities will likely operate to a more seasonal pattern to backfill loss of Rough capacity. This in turn reduces the volume of deliverability flexibility that the UK market has to dampen price fluctuations. In other words it supports prompt gas price volatility and the value of faster cycle storage capacity. This is a dynamic that is likely to support gas volatility across the European gas market."
Game changer for MRS facilities! !
Correction to my last post.
My apologies to Peteluton for misrepresentation.
He was talking about Infa BoD not MMs in that post from 28 March.
Here's another snippet from peteluton from Inf 28 March...talking about the MMs....
'Really sorry for you mate and all of us that took these shisters at face value.Hopefully they'll pay for their treachery in the next life.Harsh, but so what they don't read these posts anyway'
See what he did there?. ....he states that the MMs don't read these posts....yet his ranting email today is bullying people into enforced silence so the MMs can't read the posts!!!!!! This is the logic of either a sorely troubled individual or a master manipulator.
Well said Dawski.....its good to talk!
Here is a snippet of a post by peteluton that says it all. its from September on another site.....
've just tuned into this BB and although i have no holding would quite happily state my reputation as a dealer that.....'
Well i’m certainly not in for a punt. I have over 1% of these and if I have the balls, I’ll sell down on my one fund and top up here. Infa is my only holding apart from my fund and I hope it makes me lots of money. I’m more than happy to wait as long as it takes. Most of the money I’ve lost in the past has been from jumping in and out of stocks. I’ll just stick here and enjoy the ride.
Well, not too strange a post for a Saturday night post:-))). I agree that more likely than not there'll be delays and set backs over the next couple of years. The secret is, of course controlling these and the associated costs. Regarding the MMs They're only happy when volumes high so they're making a healthy wedge. I really don't think they care whether the sp is moving up or down just that there's volume. Neither do I think that anything posted has any influence on their actions, they'll keep on trying to stimulate trade by manipulating the sp and the spread. Personally I'm looking forward to some hopefully excellent divi returns for decades to come,starting in three or four years time.
It's a University of Warwick research paper studying the effects of an outage at the Rough storage facility in 2006.
The paper analyses the effect this unforeseen outage had on UK gas prices (it did, statistically, but more so on creating greater price volatility than actual supply constraints). It goes on to consider in Part 6, Appendix I, A Note on the Cost of Gas Storage.
Here, it puts the cost of adding underground gas storage at $27mn per bcf.
"A more recent estimate comes from a short prospectus arising from the prospective sale in mid 2011 by Continental Gas Storage BV of its German subsidiary to Haddington Ventures LLC. The equivalent development cost here of the final project amounts to around $27m per bcf, for a salt cavern facility."
This is in line with the indicative cost to build the full IM facility of 500mn cubic metres (1 cubic metre = 35.3 cubic feet).
This section of the paper then goes on to compute a replacement cost for Rough of £1bn (for 103bcf capacity), and , " requiring a return of say £150m per annum over a short period". Running costs were in addition.
This return on investment (15%) was deemed to be "commensurate" with the short-run higher returns from higher gas prices during the outage, enabling the gas storer to generate positive returns.
So, to answer your question, I assume that Infa would be seeking a price level for renting out the IM facility on a 12-5 year basis to a gas trading entity, sufficient to generate a circa 15% ROI, before costs of extraction and injection (which are to be borne by the gas trading entity, according to the rns).
Note, this is exactly in line with the indicative ROI in Infa's Jan 2018 presentation (page 9). How convenient! Maybe they have had sight of this paper?
In any case, it is an answer to your question that derives a rental price backwards from the assumed capex, with a required infrastructure ROI, rather than what other salt cavern storage operators charge.
Hope this helps.
Here is the criteria laid out for our £40M EU grant bid,
2018-2 CEF Energy Call for Proposals
6.5. Award criteria for grants
The proposals will be evaluated against the following award criteria taking into account the list of general orientation as stipulated in Article 17(5) and in Part V of the Annex of Regulation (EU) No 1316/2013:
(1) Maturity of the action with regard to the developmental stage of the project, based on the implementation plan (Article 5(1) of Regulation (EU) No 347/2013)
(2) Cross-border dimension of the action, area of impact and number of Member States involved in the action
(3) Extent of the positive externality provided by the action involving works, impact of the action on solidarity
(4) Need to overcome financial obstacles
(5) Soundness of the implementation plan proposed for the action
(6) Stimulating effect of the CEF financial assistance on the completion of the action
(7) Priority and urgency of the action, will the project remove bottlenecks, end energy isolation and contribute to the implementation of the internal energy market.
Looks like a very good fit to me!
Avyer....'Don't forget that Infa will, (if they still own it) be paid just to pump and store. We would like to know at what rates!!'
Despite hours of trawling on tinterweb............can't find one damn concrete example or case study of the sort of ballpark figure that any company has paid for this kind of service.........either as a straight fee or % of current gas price per KWH......seems shrouded in mystery.......I realise that it involves loads of variables (distance to above ground infrastructure and proximity to distribution network pipelines....two points that obviously work well for us), current gas price (we could guestimate that) and many others but (asking the virtually impossible can anyone put even the vaguest value on it?.....anyone worked at that level in the industry or can anyone find a past example what a large distributer has paid?....Do you think an email to BoD would generate a reply with even a hint of some sort of range....probably not...hands tied and that sort of thing!
Worth revisiting this paragraph after the news we had this week.
"Third-party consultants have confirmed the facility’s technical and commercial viability, and the project’s economics are underpinned by a long-term lease to an off-trader, that will trade seasonal and short-term gas price volatility by rapidly injecting and storing natural gas ready for immediate withdrawal."
Hi Snowman. Good work.There is certainly more on the website than I remember noticing last time I looked, including photos and details of the main players. The comment about phase 2 into S. Ireland and UK, is, as you say, newish, at least to me.
Has the site been updated today?.......I can't remember seeing this bit, or has it always been there?
...'It is intended that the second phase of the project will extend its reach into the UK mainland. '
O&W...you are spot on to point out this most excellent arti le by Rapid Dave.
I must admit this article is NY guilty pleasure and I must have read and reread it a dozen times over the past few months. It is quite simply superb and packed to the gunnels with deep insight.
This project will go with graceful ease from strength to strength and momentum is building solidly. The project has the kinetic energy of a turbo charged King Cobra about to strike!
And here is that blog link in its entirety:
Well worth a read.
With Thursday's LOI rns with a "blue chip" gas trader, could this statement, by David Marshall in his excellent June blog report on Infa, provide cash to help finance Infa to retain a larger, indeed majority, control of the IM project to final build:
"The author believes one early route to revenue would be from advance letting of caverns to tenants. This is echoed by management who said that it may be likely to see pre-letting agreements and possibly pre-sale agreements as early as this year".
It certainly seems much more like a front-runner now than a few weeks or days ago.
....for one wobbly moment there, I thought I was losing my super-power gift of extra-sensory perception mingled with a dash of quality bullshit......I think I'll cut my losses and go out on a high.....I hereby solemnly swear never to engage in any further predictions.
I will now sleep the sleep of champions.....good weekend all !
Next week should see a continued rise (whoops, I'm at it again already !) as word gets around and the relevant peeps empty their piggy banks and instruct their brokers to initiate some nice chunky buys.
Hope to meet some of you on 5th December.
Blue is blue Spud, I’m having it, well it’s down in my notebook as blue anyways, hope you give the wildlife a rest this weekend, I hear there’s a good rugby match on ;) Come on the whites
The uncrossing trade (UT) has distorted the close.
We will open on Monday down so don't panic!!!!!
Lol have a great weekend everyone
You win snowy, I will never doubt you again ;)
Purchased at 15:00 & not shown up on buys page :/
I nibbled again too :D
and we finished blue guess you were correct
there is still the delayed trades that might cheer us up..
It would seem I have failed miserably!