UK Expected To Avoid Gas Shortages In Coming Winter

It has been predicted Britain’s gas supplies in the 2013/2014 winter season will be sufficient to avoid running short as it nearly did last winter although wholesale prices are already higher than a year ago and are likely to keep rising.

Last winter the cold weather extended well into April and demand was high for an unusually long period of time. This almost depleting gas storage sites and to avert disruptions Britain had to import liquefied natural gas (LNG) at Asian levels of 150 pence per therm.

National Grid said this month it expected gas demand in the 2013/2014 winter to remain under 450 million cubic metres per day (mcm) and that usage would not exceed 250 mcm in case of a warm winter.

Utilities are still behind schedule this summer in refilling storage facilities however data shows that still there should be enough gas available to meet the coming winter demand. This is assuming a normal weather pattern unlike last year’s.

Despite being behind schedule in refilling our storage sites it is thought we will be fine this winter, especially as we have another two months of low summer demand ahead of us to restore before the new gas year and winter heating season starts a gas storage analyst has said.

The decline of domestic gas output from the North Sea has forced Britain to depend more on imports of spot gas. Its total storage capacity of around 5,000 million cubic metres is enough to meet less than two weeks of peak winter demand.

Stored gas currently amounts to around 3,400 mcm, some 15 percent below the level at this time last year.

The average annual depletion rate between summer and winter of Britain’s gas storage sites since 2009, however, has been around 3,400 mcm, so there should already be enough in storage to avoid a squeeze.

Rough, Britain’s biggest gas storage facility, is currently two thirds full, while at this time last year it was filled to over 90 percent. If it continues to inject at its current rate of 20 mcm per day, however, Rough will reach its full capacity of 3,500 mcm by October, in time for the winter season.

Most analysts expect Britain’s wholesale gas prices to rise during the winter.

Spot prices now are already around 20 percent higher than in July 2012 at over 65 pence per therm, a level that is more common during winter months, due to production problems at Norway’s Troll gas field, which has reduced Norwegian gas supplies.

Given Troll’s reduction, someone else will have to cover supplies in case of a cold spell, but in order to attract LNG Britain’s prices need to reach closer to Asian levels, so UK gas prices may find a new high this winter a gas analyst said.

Asian spot LNG prices are currently around $15.75 per million British thermal units (mmBtu) – equivalent to almost 160 pence per therm – compared with around $9.50 per mmBtu in Britain.

Due to the system looking tight, what we will see is generally higher UK price levels this winter, but prices will only briefly rise to Asian levels in order to attract the odd LNG cargo should there be short-term supply shortfalls one gas trader has said.