U.K. Gas Falls From Seven-Year High as Belgian Pipeline Is Fixed

U.K. Gas Prices Jump to Seven-Year High as Belgian Supplies Halt
Demand in the 24 hours to 6 a.m. tomorrow is predicted at 329 million cubic meters compared with a seasonal normal of 271 million, grid data show. Photographer: Simon Dawson/Bloomberg

March 22 (Bloomberg) -- U.K. natural gas prices fell from their highest in seven years as a fault on a pipeline from Belgium was fixed, allowing imports equivalent to almost one quarter of the nation’s demand to resume.

Gas for today rose 2.6 percent after earlier jumping as much as 54 percent to the highest level since March 17, 2006, according to broker data compiled by Bloomberg. Flows through Interconnector U.K. Ltd.’s pipeline from Zeebrugge to Bacton on the east coast of England halted at about 7 a.m. London time after earlier today reaching a record 79 million cubic meters a day, National Grid Plc data show. Imports resumed at 11:46 a.m. Full capacity was restored at about 2:10 p.m.

The U.K. has become increasingly dependent on imported gas as indigenous production from the North Sea slumped in recent years and the price of liquefied natural gas, or LNG, shipments traded near a record high. Norway was the source of an unprecedented 48 percent of Britain’s gas on Dec. 26, data from network operators Gassco AS and National Grid Plc show.

“We are more vulnerable to these types of events than we were five years ago,” Patrick Heather, senior research fellow at The Oxford Institute for Energy Studies, said in a telephone interview. “Something as important as the interconnector is always going to have an impact on prices. With demand at the level it is today, I don’t think the U.K. is going to run out of gas.”

Gas for today reached 150 pence a therm, before trading at 100 pence a therm at 4:35 p.m. The next-week contract added 37 percent to 135 pence a therm, also a seven-year high, before falling to 100 pence. Month-ahead gas climbed 1.5 percent to 70.8 pence a therm.

Boiler Fault

The pipeline into Europe’s biggest market halted because of a water pump failure at the boiler house in Bacton, where gas is heated before it enters the U.K. grid, according to Interconnector. The link was pumping about 70 million cubic meters a day of gas into Britain at 3:47 p.m.

“Interconnector U.K. Limited is pleased to announce that the fault in the reheating system at the Bacton Terminal has been rectified,” the company said on its website.

Inventories at Rough, the U.K.’s largest gas-storage facility, fell to an all-time low of 2,589 gigawatt-hours yesterday, equivalent to 240 million cubic meters or 69 percent of today’s forecast supply. The site is unable to flow at full capacity of 42 million cubic meters a day because of falling pressure, it said on March 19.

‘Not Running Out’

Withdrawals from Rough were at a rate of 29 million cubic meters a day after dropping to zero at about 5:45 a.m., National Grid data show.

“Gas supplies are not running out,” the Department of Energy and Climate Change said in an e-mailed statement today after The Times said on its front page that the U.K. will run out of gas in two days. “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.”

Prime Minister David Cameron is “absolutely confident” that supplies won’t run out, Christian Cubitt, his spokesman, told reporters in London today.

If Rough withdrawals continued at 181 gigawatt-hours a day, the average for the last four days, supplies would be exhausted in 14 days, according to Bloomberg data.

LNG Shipments

SSE Plc said its Aldbrough gas storage site will be halted from tomorrow through March 28 for maintenance, cutting supply by about 11 million cubic meters a day, according to a statement on its website.

The mean temperature in the U.K. will be 0.3 degrees Celsius (33 Fahrenheit) next week, the lowest average for the time of year for at least 10 years, according to MetraWeather data on Bloomberg using the ECMWF model.

Demand in the 24 hours to 6 a.m. tomorrow is predicted at 346 million cubic meters compared with a seasonal normal of 271 million, grid data show. Total flows were at 388 million cubic meters a day, after falling to 263 million earlier today.

Supply from Norway, the U.K.’s biggest source of imported gas, was at 129 million cubic meters a day after reaching 135 million yesterday, the most since Feb. 27, Gassco AS data show. Norway has supplied an average of 108 million cubic meters a day this year, the data show.

LNG tankers with a total capacity of 5.5 million cubic meters (3.1 billion cubic meters of gas) arrived in the U.K. in the five months through February, according to data compiled by Bloomberg. That’s down 53 percent from the same period a year earlier. Three tankers with capacity of 734,126 cubic meters of LNG are scheduled to arrive through March 29.

LNG for delivery in four to eight weeks in Northeast Asia cost $16 a million Btu on March 18, after reaching a record $19.40 on Feb. 4, according to assessments by New York-based World Gas Intelligence.

U.K. power for the next working day rose 12 percent to 74.50 pounds a megawatt-hour, broker data show. RWE AG shut its 2,000-megawatt Didcot-A coal-fed power station in southern England after 43 years, National Grid data showed. The facility had used up its remaining hours under the European Union’s Large Combustion Plant Directive.

To contact the reporter on this story: Matthew Brown in London at mbrown42@bloomberg.net

To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net