DTI orders study on gas shortage as wholesale prices soar |
|
|
Published
:
Sat, 19 Nov 2005 19:20
|
LONDON: The winter has set in bringing with it fears of a gas shortage fuelled by soaring wholesale gas prices last week. Gas for next-day delivery rose to an 8-month high of 80p a therm, almost double from a week ago.
Fears were given credence by a meeting held last week at 10 Downing Street between ministers, industry leaders and independent consultants hired by the government to review the situation.
Citizens were concerned that the UK’s gas supply could run short in a prolonged winter. Some operators were even prompted to draw supplies from the offshore store, a rather unusual thing at this time of year. The offshore facility is normally stored up for use during the coldest months January and February.
Additionally, news from overseas have given them enough reason to expect a gas crisis. Over the past six weeks, liquefied natural gas shipments meant for Britain have been diverted to Spain and the US because these countries are willing to buy at higher prices. It is believed that operators have made huge profits of up to $14m more per cargo by diverting the shipments.
The UK is Western Europe’s largest buyer of natural gas. Within the country energy supplier Centrica is the largest wholesale buyer.
The Met department has warned of a 65 percent chance that the winter this year could be colder-than-average saying temperatures could drop to a ten year-low; and if it decides to extend its stay, it could force power plants and 1,750 heavy industrial users to cut off. A report by the National Grid last month had warned that all the heavy industrial users could be forced to cut their gas consumption by half for a 7-week period.
As an initiative to help in the situation, the Ineos Chlor, the petrochemical group will reduce production at its Runcorn facility to one third in order to save gas and sell it to the UK’s utilities. Ineos is the world’s fourth largest petrochemical group.
At the meeting at 10 Downing St., the Department of Trade and Industry commissioned Global Insight and Ilex Energy Consulting to conduct a study of the situation. They will determine whether power stations and large industrial users can afford cuts in their gas supply and how this reduction will affect the economy. Richard Abel, director of the DTI, said it was “critical for the government to better understand the situation this coming winter.”
The consultants are expected to report their findings in three weeks.
|
|
|
|
|
|
Print this Story
Gas prices being artificially inflated by European monopolies, claims report 