Britain facing higher winter gas imports due to Rough outage
(Reuters) Even if Britain's main natural gas storage site manages to resume some withdrawals, the country will need to import up to 1.75 Bcm of additional gas this winter, according to analysts.
Centrica, the operator of the Rough storage site, warned on Friday that a shutdown for tests there would last until March or April, although it held out hope that withdrawals could restart from four wells in November.
"With the UK likely to have a 1.20-1.75 Bcm shortfall of gas in storage compared to last year's use (potentially an average supply shortfall of 11 Mcmd), the UK gas balance will likely have to replace that volume from other sources," said Trevor Sikorski, an analyst at UK-based consultancy Energy Aspects.
Britain depends on stored reserves to help manage winter demand spikes and to ensure security of supply. The Rough site accounts for more than 70% of the UK's storage capacity, National Grid data shows.
"It is expected that four wells (of 24 operated typically) will be opened to allow withdrawal from November. Working gas at Rough for the winter will now not exceed 1.3 Bcm ...this is 1.2 Bcm less than last winter's withdrawal," Sikorski said.
This leaves Britain going into winter with record low storage levels and raises questions about the ageing site's long-term future.
"(The Rough outage) will no doubt increase the UK's dependency on gas imports and increase its exposure toEuropean and global fundamentals," said analysts at S&P Global Platts.
Britain may have to pay a premium to get the gas it needs to cover winter demand, especially if there is a very cold winter like 2012/2013, as it competes with other European countries for supply.
The winter gas contract is already near a one-year high.
Sources of additional supply include imports of LNG, of Norwegian gas, and of gas from Europe via the InterconnectorUK (IUK) pipeline, which has a capacity of 10.6 Bcm or 70 Mcmd.
Last winter, Britain's imports averaged 75 Mcmd from November to March.
LNG import terminals have excess capacity and around 15 Bcm more LNG could be available to come to Europe this winter, Sikorski said.
In the event of a really cold winter, UK prices will have to rise to attract the gas from Norway, continental Europeor LNG suppliers.
British gas prices could rise above Asian LNG prices to attract supply to UK terminals, said Oliver Sanderson, gas analyst at Thomson Reuters.
Asian LNG prices for September delivery are currently trading around 43.60 pence per therm, below British gas prices for winter delivery of 46.75 pence per therm.
"This is a far smaller likelihood than the need for more imports from the Continent, but (this) cannot be discounted at present," Sanderson said.
Reporting by Nina Chestney; Additional reporting by Oleg Vukmanovic; editing by Jason Neely
Comments