Freezing weather and record demand for
U.K.
natural gas has forced grid operator National Grid PLC (NGG) to issue a Gas
Balancing Alert to the market via email Thursday, the second such alert this
week.
Gas Balancing Alerts are triggered when gas demand threatens to outstrip
supply. It warns major users of gas they may have to cut consumption because of
the cold weather and companies on interruptible gas contracts risk further
reduction or cessation of their supply.
"This is a major concern," said British Glass director general David
Workman. "So far I've no feedback on disruptions but the longer the cold
snap goes on, the more worrying the situation becomes for the [glass] industry.
Even in mild winters we've worried about interruptions because of the lack of
gas storage provision."
"A substantial number of industrial consumers have had their gas supplies
interrupted to maintain supplies to domestic consumers," an employee at a
food processing business in the Midlands region of the U.K., who didn't want to
be named told, Dow Jones Newswires this week.
However, it remains unclear how many businesses may have been impacted by
Thursday's alert. Companies sign contracts for interruptible supply in exchange
for lower energy costs.
"As a result of this latest alert, demand has subsequently fallen, which
indicates major end users have potentially turned down production or turned to
coal," said Nick Campbell, an analyst at Inenco.
Prior to this week, National Grid has only once resorted to using the alert, in
2006, following a prolonged shutdown at the
U.K.
's
primary storage site after a fire.
National Grid's forecast for Thursday's demand has fallen from near record
highs, but supply remains under considerable pressure following an outage
earlier in the day at a Norwegian gas field.
Norwegian gas supply to the
U.K.
through the pipelines dropped significantly as a result of a shutdown in the
Troll A gas field. Consequently, forecast supply dropped from around 474
million cubic meters to 443 million cubic meters.
Late Thursday traders said prices for prompt within-day
U.K.
natural gas had softened following the alert after trades heard at 54 pence a
therm earlier in the day , around 20% higher than deals done at close of
trading Wednesday.
"Two gas supply alerts in one week shows just how precarious the
U.K.
's
energy position has become," said opposition energy and climate change
spokesman Greg Clark.
"Business users are first in line to take the hit, paying higher prices
than they would if we had more gas in storage, and now being warned they face
cut-offs. This is the last thing our economy needs right now--forced cuts to
gas supplies adding to the woes of the recession."
The
UK
's pressing need for gas has been further exacerbated by freezing
temperatures in continental
Europe
, which means supply from
Norway
's
Langeled pipeline and through the Interconnector pipeline that links the
U.K.
with
Belgium
has been limited, traders said.