UK will be forced to buy back gas shipped to Europe for storage

After supplying approximately 15% of the supplies on the continent, Britain will have to purchase back the gas it exported to Europe.

Because the UK lacks storage, the gas that was shipped to terminals on the other side of the Channel and then piped away will need to be returned to the country when temperatures drop.

In recent months, unprecedented quantities of fuel were sent via the UK to the European Union as countries raced to stock up on their fuel reserves after Russia stifled supplies.

Britain has very little gas storage and so it often buys gas from the Continent in winter.

It will expose the country to higher prices and market chaos if Russia moves further.

Peter Thompson, a Baringa consultant and gas market expert, stated that the UK’s gas market stores gas in continental Europe storage. The gas is then pulled out of the UK in the winter.

“That’s what usually happens. However, I believe there is a question this winter. There’s no business as usual.

It will depend on many things, including the Russian supply and how cold it is.

Russia announced Friday that it’s key Nord Stream 1 pipe to Europe was not going to reopen as planned.

Gazprom, the giant state gas company, blamed technical issues, but Russia is accused in retaliation for sanctions.

Europe doesn’t have enough Liquefied Natural Gas terminals to meet its needs. So Britain accepted shipments at three of its facilities for the EU over the summer.

The product is then turned back into natural gas in Britain, and piped to Europe via pipes to Belgium or the Netherlands. Europe does not have enough LNG terminals. The EU’s stations are currently 80pc full.

The UK is sending gas from the UK, Norway and the North Sea to Europe. National Grid estimates these supplies make up about 70-75 percent of the current exports.

National Grid’s director of system operations, Ian Radley, stated last month at an industry meeting that the UK is on track to export 14bn cubic meters (bcm), of gas to Europe by winter. This would be approximately 14pc of the total EU storage capacity.

He stated that the “National Transmission System” in the UK plays a crucial role in the EU’s goals of replenished storage.

Radley said that the practical difficulties of the involvement are “disregarded by the benefits of continuing export capacity and doing what we can as a nation in order to ease what could be and still remains a very difficult situation for everyone”.

The UK exports gas to Europe in summer, but usually at much lower volumes than this. As its demand increases, the country imports gas during winter.

Aurora Energy Research claims that the UK can receive as much as 25%-30% of its gas supplies from Europe in a normal winter.

Prices in the UK must be higher than those in the EU for imports to flow to the UK.

This winter, it could be necessary to charge extremely high prices in Britain for cold days. This is due to increased prices after more than a year of high gas prices. There is a possibility that some European countries might reduce exports if supplies are worsened.

Aurora Energy Research projects that the UK will have to import at most 10pc of its EU gas this winter in order to meet the demand.

S&P Global Commodity Insights predicts that Britain will remain a net exporter of EU commodities this winter. This is because LNG shipments will continue.

However, it is likely that some EU imports will still be required for individual cold days.

Senior analyst at S&P, Ying Chin Chou, stated that every 1-degree drop in temperature can increase the demand for gas for heat by 10-15 million cubic meters (mcm).

She said, “Demand can increase quite quickly.”

According to S&P, gas demand in Britain, this winter will be 40mcm lower than normal, or around 15pc, due to soaring energy costs and other factors.

Centrica was granted permission last week to reopen the North Sea Rough natural gas storage facility, which had been closed in 2017.

It is still in discussions with ministers regarding financial support for the site for the long term but has not yet set a date for its reopening.

John Redwood (Tory MP) is expected to return to government if Liz Truss wins Monday’s Tory leadership contest. He said that it was a strategic mistake not to have more storage.

“Of course, we need more gas storage, but my number one urge for many years was getting more of my own gas out of the North Sea and onshore, where it is supported by local communities.

“But the UK’s position is a lot stronger than that of Germany or Italy, which are much more dependent upon Russian gas.”

According to a spokesperson for the Business Department, “When Europe’s market price is higher, gas flows to Europe.” Gas flows home when the UK’s price is higher. This is entirely driven by the market and not Government.

“Britain has a strategic advantage over other European countries.” The UK has a wide range of energy sources that will allow households, businesses, and industries to be assured they can get the electricity or gas they require.

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