It’s the time of year when many people and businesses are required to file their taxes and work out whether they have stored away enough funds to foot the bill. A similar storage calculation happened in the UK a week or so ago, when, at the end of what has been a long Winter and in the midst of a very cold snap, it was announced that UK gas storage was down to two days’ worth of supplies, or 10% of total capacity. Cue much panic, from all parties. Of course, the UK is fed by several different lines of supply, storage being just one part of the complex oil and gas delivery system that keeps the island powered up. As the Department of Energy and Climate Change (DECC) was keen to point out in a statement: “gas storage would never be the sole source of gas meeting our needs, so it is misleading to talk purely about how many days’ supply is in storage.”
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Whilst two days’ worth of stored gas is pretty low, certainly when compared to other European nations, the UK is fed by a range of sources, including the North Sea, several pipelines from Norway and the EU, and shipments of LNG. It was, in fact, a pipeline shutdown that precipitated the panic: the Interconnector UK (from Belgium to the UK) was unexpectedly closed, causing a large spike in the price of wholesale gas, which subsequently caused everyone to ask questions about storage, and react in shock when the low supplies were revealed.
The temporary pipeline disruption, now back on line, happened because of a water pump failure at the receiving terminal for the Interconnector. A connection to a pump on the hot water system that heats the gas from the pipeline before it enters the UK network failed. Gas flow to the Bacton gas terminal was suspended while engineers attended to the problem. Flow was returned to full capacity to the terminal in Norfolk, England, after a shutdown of eight hours.
In total, some 30% of Britain’s gas flows into Bacton, so approximately 25 million m3 was lost. As a result, there was a mini ‘energy crisis’ and newspapers were filled with in-depth accounts of the UK’s energy mix. Avid readers were comforted by the news that three LNG tankers were due in from Qatar imminently, along with another from Trinidad; soothing news to those who were taking a new interest in gas supplies. Prime Minister David Cameron was keen to quash rumours about supplies running out, stressing the responsive nature of the UK gas market and his confidence in the continued ability of the system to provide sufficient gas to homes and businesses.
Of course the media focus on the energy supply blip was intensified because of much publicity surrounding rising energy prices for consumers in Britain. It has been announced that household energy bills are set to go up by as much as £200 (US$ 300) in the next year. Consumer groups in particular are keen to suggest that increased gas storage would cushion against price hikes and potential shortages. The fact is, there has been no actual shortage or rationing of gas – supply has been keeping up with demand, despite Britain working at 40% above its usual gas capacity for this time of year.
The UK is dependent on imported gas since North Sea reserves began to dwindle but these supply routes are secure and longstanding.
In addition to this energy mix, Centrica (owner of British Gas) has just announced a £10 billion deal with Cheniere Energy Partners to export LNG from the US to the UK. Reports that some two million homes in the UK are set to be heated by US shale imports within five years should be balanced against the fact that Centrica will probably only import the LNG should gas prices in the UK be able to offer similar or better returns than if the gas goes to Asian markets. So, in this sense, the US LNG will be a safety net – to an already diverse and functioning gas supply system.