tirsdag 19. desember 2017

Russia to send first Arctic gas cargo to Britain in the wake of supply crisis

Russian President Vladimir Putin opened the arctic gas project last week and it's first delivery will be to the UK
Britain has emerged as the unlikely first recipient of gas from a sanctioned Russian project after fears of a winter supply crisis drove prices close to five year highs.

Russian President Vladimir Putin opened the £20bn Yamal project on Russia's northern coastline last week. Shortly after, British wholesale gas prices soared to four-year highs when a crucial North Sea pipeline was put out of action by a crack and a distribution hub in Austria was hit by an explosion. 
Now a deal has been struck to bring the debut cargo from Yamal to the Isle of Grain import terminal via a specially built ice-breaking tanker by the end of the month. 

 
Britain rarely receives deliveries of liquid natural gas (LNG) in winter because prices are typically far higher in east Asian markets. However rocketing demand in Europe drove the price for gas delivered to the UK to more than $10 per million British thermal units. This put the UK on a par with Asian gas markets, which are some of the most expensive in the world.

Around 40pc of the UK’s domestic supplies have been wiped out until the new year due to the emergency shutdown of the North Sea’s Forties pipeline, operated by Ineos. Supply from Europe has also been constrained by the explosion at a hub in Austria and technical problems in the Norwegian North Sea.

Despite the upheaval Government officials have repeatedly argued that the UK is not facing a threat to security of supply due to the wide range of gas sources available.
President Vladimir Putin
Britain has emerged as the unlikely first recipient of gas from a major new Russian project Credit: Mikhail Svetlov/Getty Images
A UK Government spokesman said again today: “There is no security of supply issue for fuel or gas supplies as a result of the repairs needed to the Forties pipeline, and as the National Grid analysis shows, we have healthy gas and electricity margins this winter.

“Energy Minister Richard Harrington has spoken to Ineos and we will continue to liaise with industry operators to monitor the situation and ensure repairs are undertaken as quickly as possible.”
The booming cost of locking in gas deliveries during a major supply squeeze and freezing weather could still have serious consequences for energy users.

Energy suppliers are typically forced to raise prices to cover higher costs, and smaller suppliers without the financial wriggle room may even face an existential risk as they battle to buy extra gas at short notice.

Major industrial users are also expected to suffer due to the higher cost of gas.
Russian worker
Credit: AFP
Ed Cox, an LNG market specialist at ICIS, said “a price spike like the one we’ve seen this week obviously makes the UK market more attractive” for LNG deliveries. But he warned that the buyer, Malaysia’s Petronas, may still choose to divert the shipment before the end of the month if it can find a more lucrative market.

Already Asian gas buyers have raised their offers for gas to $10.50/MMbtu in response to the European gas market shock.

“This cargo won’t by itself make a massive difference to the UK’s supply picture but it does show how Europe has impacted the global market,” he added.

The UK is scheduled to receive only one other LNG cargo for the rest of this month.