Gas spot-price plunges as pipeline floods UK:
The price of wholesale natural gas plunged into negative territory yesterday as huge volumes of Norwegian gas flooded Britain's network in tests conducted on a new pipeline. So much gas flooded the system during the tests conducted by engineers on the Langeled pipeline that National Grid began to pay shippers to take gas out of the grid to reduce pressure. The spot price of gas tumbled to minus 5p per therm. The sudden surge of gas was technical and had no immediate commercial significance, UK gas suppliers insisted. However, the successful pipeline test showed that a vital piece of new gas infrastructure could deliver huge volumes of fuel. “There will be a lot of thinking going on now [about winter gas prices]. It depends on the weather, but it is beginning to look like a reasonably wellsupplied market this winter,” Patrick Heren, publisher of the Heren Report , a gas industry journal, said. Gas began to flow last week into Langeled, a $6 billion (£3.18 billion) pipeline that links Norway's gasfields with Easington in Yorkshire. Engineers began to test the pipe on Sunday, raising the pressure to maximum levels to test the system for leaks. Volumes reached 40 million cubic metres per day, a fifth of current demand and roughly equal to a tenth of demand on a cold winter's day. On the futures market, November and December gas prices dipped between 2p and 3p per therm as traders realised that Langeled was functioning smoothly. Langeled's impact on British gas prices in the crucial winter months will depend on the weather and how much spare gas Norway has to sell. Until the northern leg of the pipeline is hooked up to the giant Ormen Lange gasfield that is earmarked for the UK, Britain will be competing with Germany for Norway's existing gas output. A spokesman for National Grid said that it had never seen negative prices throughout the system. With 50 shippers moving gas in and out of the grid and trading to secure short-term profits, the market is often out of balance. In order to keep pressure stable, National Grid buys gas on the spot market and spreads the cost among all the market players. This aims to keep the market in balance and stabilise pressure in the pipes. Yesterday's extraordinary volume surge found no commercial outlet. “The weather was mild, the storage facilities were full, there was nowhere to put the gas. The Norwegian engineers trashed the market,” Mr Heren said. British Gas was dismissive of the significance for consumers of yesterday's negative price, pointing to a January forward price of 74p per therm. A spokeswoman for uSwitch, the energy switching service, said that its customers had seen gas bills increase dramatically this year. “We urge Ofgem (the regulator) to ensure that provisions are put in place to make sure households profit from falling wholesale prices,” she said. 9.10.06