Tuesday, October 19, 2021

Reports that Italy could hold back its gas exports to Europe push U.K. to look at Germany storage plan

British gas supplies are at risk of running dry as many people become increasingly worried about shortages amid reports that Italy may temporarily stop shipping gas to its European partners.

Meanwhile, the government says the issue is one of the reasons it has held discussions with German utility E.ON about its proposed U.K. gas storage scheme.

The Office of Gas Markets, which oversees U.K. gas supplies, reported that three LNG cargoes were not available at dock at Grangemouth last week, while imports into the U.K. fell by 25 percent last week from the same period last year.

Gas experts say Britain has seen a big increase in demand for the fuel in recent weeks and that has coincided with a drop in supplies. In addition, industry has introduced warm weather tariffs in recent weeks to protect consumers from potential shortages.

“There has been a switch from the gas market to the electricity market in the last six months, which has raised the overall demand for gas by 60 percent in the UK,” said Richard Bush, executive director of consultancy Gas Intelligence.

Bush said he expected the gas demand would continue to rise as the U.K. faces another drop in the price of carbon and as summer temperatures linger.

The country’s National Grid said gas markets would be “better supplied than at any time since 2010.”

However, Ian McIntosh, chief executive of power generator Drax, told the BBC that he expected U.K. gas prices to rise quickly in the coming weeks because some supplies were not expected to be replenished after pipeline maintenance in the Netherlands and Britain.

“This is creating uncertainty as far as we are concerned and because prices tend to follow demand, I expect it will lead to a sharp rise in gas prices,” McIntosh said.

Gas supplies, however, are difficult to predict because major European pipeline and storage networks have closed down in recent years.

New pipelines are planned for Central Europe, as well as plans for a storage project on Scotland’s Forties pipeline. The projects have failed to meet with a lack of political support.

One proposal, the Kamsarmax project, was approved earlier this year, but that is expected to only begin operations later this year. The companies involved in the Kamsarmax project say they will continue to work towards the development of a second site in Scotland, known as the Mackenzie Access Project.

Scottish National Party Deputy leader Angus Robertson told the BBC that the risk of gas shortages was “very real” and that the two options for U.K. energy security that were put forward by the government in 2010 were “unrealistic.”

“While they concentrate on investing billions of pounds to build new, expensive fossil fuel power stations, we should be investing in new, cheap electricity and creating markets for renewables, energy efficiency and energy storage technologies,” Robertson said.

Scottish National Party Finance spokesman and Economy Secretary Keith Brown said the U.K. gas price rises should “give the government license to back away from the Kamsarmax plant and instead investigate other, more sensible, alternatives to lower costs and cut risks to customers.”

Brown has said that the national regulator, Ofgem, should also investigate the “cost and logic” of various bids by the Kamsarmax companies to build a new liquefied natural gas plant in Scotland, called Greenfir.

Instead of the Greenfir, Brown said the U.K. should consider building a new storage system in the north east of Scotland instead.

This, Bush said, would help address the country’s problem.

“Unfortunately there is not a clear solution on the table at the moment and therefore people are either trying to scare the government into action or try to manage the supply by building up their own storage systems,” he said.

Bush said he did not expect gas shortages to last too long.

“If the forecasts prove correct and there is a gas gap, it’s not going to be very long, and supply will be secured because the U.K. is a huge consumer of gas itself,” he said.

Latest article