LNG truckloadings at Gate on the way to hit record high in 2018

The number of trucks loaded with LNG at the Dutch Gate terminal in 2018 is on the way to a new annual high. Activity climbed to record levels in May and June underpinned by higher LNG supply, new infrastructure and bunkering activity.

Trucks loaded at Gate in May numbered 264, up 80% month on month and a new record at the time for a single month since truckloading facilities started operating at the terminal in 2014.

Trucks loaded in June then totalled 281, a fresh record, sources at the Gate terminal told ICIS.

This brought the total number of trucks loaded at the terminal between January and June of this year to 1,133, around the same amount of trucks loaded in the whole of 2016 and not far from the 1,629 trucks loaded through the whole of 2017, according to data from Gate and Gas LNG Europe.

Investment

A major factor increasing truckloading activity at Gate was infrastructure investment. On the demand side, a series of LNG fuelling stations opened in the Netherlands and neighbouring countries, which boosted demand at the terminal.

LNG fuelling stations are typically refuelled by trucks which load LNG onto tanks at the terminals and carry them to the stations.

According to the Natural and bio Gas Vehicle Association (NGVA Europe) the Netherlands is home to the third-highest number of LNG fuelling stations, with 24.

For comparison, neighbouring Belgium has four operating stations.

Only Italy with 28 and Spain with 29 have more operational LNG stations.

While Spain has its own truckloading facilities, Italy is highly reliant on trucks loading in France and in the Netherlands, according to sources on the Italian market.

On the offer side, Gate opened two new truckloading bays in July 2017, which added to a bay opened in 2014 and to a small-scale LNG jetty opened in 2016.

TTS bunkering

Sources at the terminal said they had also witnessed truck-to-ship bunkering activity surge at Gate in the past few months, which would have boosted the number of trucks loaded at the terminal.

Truck-to-ship (TTS) bunkering is the transfer of LNG from a truck to a vessel which is moored to a dock or jetty. Tank trucks are a flexible way of bunkering vessels with small LNG bunker volumes. Sources told ICIS that if trucks are loaded in order to fuel a ship at the terminal, operators can get reduced fees for truckloading.

A source on the market told ICIS that TTS at the ports of Rotterdam and Zeebrugge is currently more in the money compared to ship-to-ship transfers for small vessels. “Considering the costs of keeping a ship running while it refuels another ship, it can be much more convenient to fuel the ship using multiple trucks at the same time,” the source said.

LNG supply

A higher number of cargoes delivered at Gate in May also fed into the fundamental picture, lifting the number of truckloads.

Dutch imports of LNG reached record highs in May 2018, ICIS data shows, as oil supported European hub prices and falling Asian demand freed up more cargoes for Europe.

The imports were spread across four vessels, one each from Algeria, Qatar, Norway and Russia. The Algerian vessel, the Tessala, was a spot cargo and the others were under short-, mid- and long-term contracts.

LNG usually commands a higher price in high-demand Asian markets, but in May the front-month contract’s premium on the East Asia Index (EAX) to the Dutch TTF hub eased with the onset of the summer and falling demand, while European gas prices ticked higher driven by the rising oil price. This made European terminals more attractive.

More LNG into terminals and easing supply margins on the back of warmer temperatures left some room for LNG to be captured by the small-scale market.

TLX prices

Prices for LNG loaded onto trucks at Gate also softened on the spot market compared to the months up to April. Lower prices were mainly due to a softening gas market, which was pressured by easing supply margins after a cold end to last winter.

TLX assessments for delivery at Gate show that the spike in the number of trucks loaded also coincided with a decrease in prices (see graph).

Outlook

Truckloading rates at Gate are unlikely to decrease in the months ahead, as the structural growth in LNG consumption as a truck fuel and investments in infrastructure are expected to keep supporting demand for truckloadings at the terminal.

Two sources on the small-scale market said that Gate was more likely to capture growing demand due to new infrastructure investment such as fuelling stations due to its proximity to a high number of Dutch fuelling stations and the traditional discount of truckloading prices to Zeebrugge.

For example, the cost of loading LNG onto trucks at the Zeebrugge terminal for delivery in year 2019 is around €0.10-0.15/MWh above the costs of loading trucks at Gate for the same period, market participants told ICIS.

A third source said logistics plays a bigger role than price in boosting activity at Gate. “Gate’s advantage is that it is closer than Zeebrugge, this is not a LNG price issue, but more the logistic cost, which on balance is more a cost factor than the LNG itself,” the source said.

The proximity of the fuelling stations to which the trucks deliver LNG has a great impact on the costs of loading at a terminal as volumes are relatively small compared to the large-scale market. A full standard cargo loaded onto trucks is around 20-40 tonnes of LNG.

For this reason, the sources thought that Gate will consolidate its higher number of trucks loaded compared to Zeebrugge in 2018. While the number of trucks at Gate increased by around 50% year on year in the first half of 2018, the number of trucks loaded at Zeebrugge between January and June was 10% lower year on year at 650, based on figures from the two terminals. Alice Casagni

ICIS TLX assessments

ICIS started assessing the costs of LNG loaded onto trucks at two of the major European terminals in February 2018.

The weekly assessment is known as the truck loading index (TLX) and is published on the last working day of the week in the European Spot Gas Markets (ESGM) , accompanied by a market comment.

A front-year price is assessed for the Dutch Gate and French Fos Tonkin terminals. The TLX for Gate represents a premium to the front year price at the Dutch TTF hub, while for Fos Tonkin it is against the PEG Nord front year contract.

For further questions regarding the TLX, its price discovery process and to participate in data submissions for the assessment please contact Alice Casagni on alice.casagni@icis.com.

ICIS has also started publishing analysis of the small-scale LNG truckloading market as part of its ongoing drive to provide in-depth coverage of emerging markets. ICIS’s decision to start assessing TLX products aims to represent a market that is growing in liquidity and shifting from oil indexation to hub indexation.