Half of the gas used by British families to heat their homes this winter will be imported from overseas, the highest proportion on record, as production from the North Sea continues its steep decline, National Grid said last night.
In its annual Winter Outlook, on the state of Britain’s energy supplies, National Grid said production of the fuel from the UK sector of the North Sea would be 6 per cent lower this year than in 2008-09. That will leave Britain having to import 50 per cent of its gas supplies from countries such as Norway, Qatar, Trinidad and Algeria, a sharp rise from 27 per cent in 2007.
A spokesman for Centrica, owner of British Gas, said the UK’s ageing gas fields — many first tapped in the 1970s and 1980s — were no longer able to keep pace with domestic demand. “On the current trajectory we will have to import three quarters of our gas by 2015,” he said. Britain was still a net exporter of gas as recently as 2003 and was forced to import about 5 per cent of supplies in 2004 for the first time.
National Grid, the operator of Britain’s national gas and electricity network, said the decline would mean Britain had to import far more by ship as liquefied natural gas (LNG) this winter. The group forecast that about 40 million cubic metres of LNG would need to be imported to Britain every day this winter — representing about 10 per cent of peak winter demand.
That would be a fourfold increase from 10 million cubic meters a year ago. Further imports will be made via pipelines from Norway and Holland. The depletion of the North Sea’s gas reserves comes as the UK is becoming more reliant on the fuel for power generation. Almost 35 per cent of UK electricity now comes from gas-fired power stations, up from less than 5 per cent in 1990. But energy analysts said this growing reliance on imported LNG is set to compound volatility in UK gas prices, which could hurt consumers.
Nick Campbell, energy trader at Inenco, said that there were signs of growing speculative activity by hedge funds in the UK gas market because of the narrowing price differential between US and UK LNG cargoes. “The premium between the UK and US gas market has tightened recently and this means potential competition in the Atlantic Basin could increase for LNG cargos. The US hedge funds will potentially use this differential to gain by playing one market against the other.”
This increase in speculative activity is reflected in the number of UK gas contracts being traded on the Inter Continental Exchange (ICE). The number of traded UK gas contracts on ICE has increased from an average of 73,401 each month a year ago to 126,000 a month so far this year.
National Grid also said that daily gas prices this summer had been less than half those of 2008, averaging 26p per therm against 60p per therm then.
A spokesman for Centrica, owner of British Gas, said the UK’s ageing gas fields — many first tapped in the 1970s and 1980s — were no longer able to keep pace with domestic demand. “On the current trajectory we will have to import three quarters of our gas by 2015,” he said. Britain was still a net exporter of gas as recently as 2003 and was forced to import about 5 per cent of supplies in 2004 for the first time.
National Grid, the operator of Britain’s national gas and electricity network, said the decline would mean Britain had to import far more by ship as liquefied natural gas (LNG) this winter. The group forecast that about 40 million cubic metres of LNG would need to be imported to Britain every day this winter — representing about 10 per cent of peak winter demand.
That would be a fourfold increase from 10 million cubic meters a year ago. Further imports will be made via pipelines from Norway and Holland. The depletion of the North Sea’s gas reserves comes as the UK is becoming more reliant on the fuel for power generation. Almost 35 per cent of UK electricity now comes from gas-fired power stations, up from less than 5 per cent in 1990. But energy analysts said this growing reliance on imported LNG is set to compound volatility in UK gas prices, which could hurt consumers.
Nick Campbell, energy trader at Inenco, said that there were signs of growing speculative activity by hedge funds in the UK gas market because of the narrowing price differential between US and UK LNG cargoes. “The premium between the UK and US gas market has tightened recently and this means potential competition in the Atlantic Basin could increase for LNG cargos. The US hedge funds will potentially use this differential to gain by playing one market against the other.”
This increase in speculative activity is reflected in the number of UK gas contracts being traded on the Inter Continental Exchange (ICE). The number of traded UK gas contracts on ICE has increased from an average of 73,401 each month a year ago to 126,000 a month so far this year.
National Grid also said that daily gas prices this summer had been less than half those of 2008, averaging 26p per therm against 60p per therm then.
Source: The Times
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