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National Grid: Britain may need pricier seaborne gas after no-deal Brexit

A no-deal exit from the European Union could lead to higher gas prices in Great Britain, should pipeline flows from Belgium and the Netherlands subside, the country's network operator National Grid PLC said in its winter outlook report Oct. 10.

Under this scenario, which National Grid said was unlikely, the country would rely more heavily on seaborne imports of liquefied natural gas. "There would need to be sufficient price signals in the market to attract regular LNG cargoes to the UK," the company said. While prices could go up, supply of gas would be guaranteed even on days with very high demand, it added.

Should this situation occur, National Grid said it had a strategy in place to manage the scenario and "no actions in the market are currently required."

But the company's central assumption, the expectation of the most likely outcome, is that there will be no impact on the trading arrangements for the gas interconnectors. In planning for this scenario, National Grid said it had been "validating the assumptions with the interconnector parties and our partner [transmission system operators]."

The U.K. is set to leave the European Union on Oct. 31. Whether there will be a deal outlining the future relationship with the bloc, including on trade, is unclear. U.K. Prime Minister Boris Johnson and Irish Prime Minister Leo Varadkar said on Oct. 10 a "pathway" to a potential Brexit deal was in sight — a development met with hopeful surprise in Brussels.

"Technical talks are taking place in Brussels as we speak," EU Council President Donald Tusk said Oct. 11. "There is no guarantee of success and the time is practically up. But even the slightest chance must be used."

The U.K. recently proposed an alternative arrangement that would replace the Northern Ireland backstop in a new Brexit deal, but the EU had rejected the proposal.

The backstop, a protocol in the first, unratified, withdrawal agreement, would keep the U.K. in the European Customs Union, and Northern Ireland in some parts of the European single market, until a solution is found to prevent a hard border. It is the main point of concern on the British side of the negotiation table.