UK 'confident' of gas supply security over winter period: official

The UK government is "confident" that there is no risk to the country's gas supply security for the current winter period given its diverse range of supplies, a senior official from the Department for Business, Energy and Industrial Strategy (BEIS) said Dec. 14.

Speaking during an industry seminar, BEIS head of gas security Alexandra Howe also said the market was responding to the current high prices to balance supply and demand.

"What we're seeing now is very high gas prices, but we're not seeing in the UK system a shortage of gas supply at the moment," Howe said.

"We are confident that there is not a risk to security of supply and that the system will continue to deliver over the winter period," she said.

Month-ahead gas prices at the UK NBP are currently the most expensive among Europe's traded gas hubs.

S&P Global Platts assessed the January NBP contract at 295 pence/therm (Eur117.95/MWh, $39.03/MMBtu) on Dec. 13, 540% higher than the NBP month-ahead contract a year ago.

"What we've seen during this period of high prices is the market respond to those high prices and ensure that gas is still coming into the system," Howe said.

"But we are paying that very high price for it, so that's the balance there. We've seen the market over this period continue to balance supply and demand quite effectively, but just delivering at that high price," she said.

"We don't have any reason to anticipate there would be any problem with security of supply over the winter period."

Storage models

Howe also said that the UK gas system worked in a different way to Europe, which uses storage to guarantee security of supply.

Lower-than-expected Russian supplies had left European storage sites emptier than usual. "What we've seen coming into this period of high prices is that European storage hasn't filled up in the same way it would normally, partially due to Russian flows not coming when they expected them to come," she said.

According to data from Gas Infrastructure Europe, European storage sites were just 62% full as of Dec. 12, compared with a level of 81% full the same time a year ago.

A cold end to November and start to December across Europe led to accelerated gas stock withdrawals, while Russian flows have remained at 2021 lows through October and November.

Howe said the UK also kept a close eye on market developments in Europe. "We are interconnected with the European market so we watch very closely what is happening there in terms of gas supply levels and prices," she said.

"That is a driver of the UK market as well," she said.

The UK has only limited, medium-range gas storage since the UK's Centrica moved to close the seasonal Rough gas storage facility off the east coast of England in June 2017.

By contrast, countries such as Germany, the Netherlands and Italy have significant storage capacity to help meet winter demand.

"Europe operates a very different storage model to that of the UK market," Howe said. "Our system runs its security of supply model based on diversity of supply -- we take a lot of gas from a lot of different sources," she said.

Gas sources

The UK produces around half of the gas it consumes, relying on imports to meet the remaining demand. In 2020, the UK produced a total of 439 TWh of gas (41.5 Bcm), while imports totaled 478 TWh, according to government data.

Pipeline imports from Norway accounted for a third of total UK gas supply and more than half of total imports at 263 TWh.

The UK also has three operational LNG import terminals. Qatar was the dominant LNG supplier to the UK in 2020, representing 48% of total LNG deliveries, followed by the US (27%) and Russia (12%), according to government data.

The UK government in early November said it had not asked for more LNG supplies from Qatar or secured extra short-term deliveries from the country following a report that the UK had approached Doha for a new long-term deal and additional supplies.

Qatar's LNG supplies to the UK have reached 6.1 Bcm of gas equivalent in the year to date, according to Platts Analytics data, compared with 9 Bcm of deliveries for all of 2020.

The UK has received 10 cargoes from Qatar so far in Q4 -- up on the three deliveries in Q3, but lower than the 19 cargoes that reached the UK in Q2.