Winter is always an interesting time of year in the energy industry, as demand spikes and any shortfalls need to be addressed. This winter has already seen demand for liquid natural gas (LNG) imports and exports rise to levels not seen in years. Due to unforeseen circumstances, the UK began this winter heating period with low long-term stockpiled levels of LNG, due to issues both at home and abroad. The recent cold weather brought an expected increase in demand across Europe and the UK’s economic situation made UK LNG more attractive to foreign buyers. New deals are also being signed to supply more LNG to the UK to prevent any threat of a shortfall going forward.
LNG Supply on the lead-up to this Winter
In the UK, the ‘heating season’ is between October and March each year. This year saw stock market trading for 24-hour delivery of LNG at its highest rate in the UK since 2007. A major cause of this is the potential shortfall caused by outages at the UK’s biggest gas storage facility at Rough, in the southern North Sea, and one in Norway, caused by workers striking over pay. As Norway provides approximately 20% of the UK’s imported gas, the three-week strike was a significant threat to gas supplies.
The outage at Rough was even more significant, however, as the storage facility accounts for 90% of the UK’s gas storage capacity and can supply 10% of peak gas demand. The problem occurred when a scheduled outage for pressure-testing revealed a problem with one well and potential issues with others, resulting in the outage lasting far longer than anticipated. This meant the storage facility at Rough was only a third full at the beginning of the winter heating season.
The LNG Supply Situation this Winter
Despite the strike in Norway and the outage at Rough, a shortage of LNG in the UK this winter is unlikely as imports have already increased and the Norwegian fields reported a record level of gas production this year. On the markets, Brent Crude, extracted from the North Sea, is selling at a better rate thanks to oil prices improving overall and UK oil and gas being more attractive to foreign buyers thanks to the weaker value of the pound.
LNG Supply in the UK Going Forward
Although the shortage of LNG this winter has contributed to an improved performance on the stock market, measures have been put in place to make it less likely to occur in the future. The world’s largest LNG company, Qatargas has signed a five-year deal to supply LNG to Petronas UK and will be delivered to Dragon LNG terminal at Milford Haven. Supplies will be bolstered further by a new LNG tanker arriving from Qatar and Centrica resuming gas withdrawals from the Rough facility soon.
Ex~i Flow Measurement is one of the few UK companies to supply the oil and gas industry. To find out how we can help you as the demand for LNG rises call +44 (0)1243 554920.