UK gas security uncertain despite free gas on Sunday:
Gas was being given away for nothing in the UK on Sunday October 1st. In fact traders were even paying up to 5 pence/therm (about $1/mmBtu) for others to take gas off their hands, according to trade screen operator the APX Group. The traders were hoping to avoid being penalized by the balancing regime, under which shippers who put too much gas into the UK's transmission system have to pay money to system operator National Grid. But industry sources said that despite the oversupply Sunday and the commercial launch of two new import pipelines, it was too early to be entirely confident about the security of gas supplies over the upcoming winter. "We are still warning the industry against the danger of complacency and people should prepare rigorously," Mark Wiltsher, spokesman for energy regulator OFGEM said. The start of deliveries through the Norway to UK Langeled pipeline was "welcome," said Andrew Hanson, spokesman for one of Britain's biggest gas buyers, Centrica. But, he said, "there remains some uncertainty over the main part of winter." On Saturday September 30th gas for day-ahead delivery was trading between 14 p/th and 8.4 p/th on the APX Gas UK balancing platform, APX Group said. That in itself was much lower than the 26.11 p/th average gas price set on the APX platform during the whole month of September. Then on Sunday, gas first fell from 6.1 p/th to zero, and then between about 1000 and 1700 BST (0900 and 1600 GMT) the price for within-day gas went negative. The lowest trades were minus 5 p/th between 1225 and 1310 BST. There were a total of 39 negative trades across Sunday. New pipelines may have contributed to the surplus of supply. On October 1 the southern leg of the 20 billion cubic meter/year Norway to UK Langeled gas line came onstream for commercial operations. It had been running test flows since September 27, providing a new route for Norwegian gas to enter the UK. Also available from October 1 was expanded import capacity through the Belgium to UK Interconnector pipeline. That can now import 23.5 Bcm/year into the UK, up from 16.5 Bcm/year previously, although the pipeline is actually being used in UK to Belgium export mode at the moment. The Isle of Grain, Kent liquefied natural gas import terminal was also available again after a brief maintenance outage in September. It received a cargo on October 1 from BP's 138,000 cubic meter British Innovator LNG tanker, although that gas was not necessarily immediately pumped into the system. Together the pipelines and LNG mean that there is plenty of potential for supply, over and above North Sea production, where most summer maintenance is now complete. At the same time, demand has been low. For Sunday National Grid estimated demand around 204 million cubic meters, or 37.4% of a peak day. Demand has been low throughout September, on the back of mild weather. A Met Office spokesman said Monday that the average temperature across the UK in September was 3 degrees Celsius warmer than the long-term (back to 1914) average. And the central England average of 16.8 degrees looks the warmest since records started in 1659, beating 16.6 degrees in 1729. The mild weather has left all types of UK gas storage over 96% full, according to figures from National Grid, as shippers inject spare gas. W while the supply/demand situation tipped into surplus Sunday, the industry is facing up to the potential for tighter markets later this year. OFGEM's Mark Wiltsher said that although the Langeled and Interconnector lines had now started commercial operation, it was not yet clear what volumes would flow through them regularly. Other uncertainties included whether the Dutch to UK Balgzand Bacton Line will come onstream on time in December and whether Excelerate Energy will start its LNG import project at Teesside. And, he said, it is still not known "what the weather has in store" for winter. In July the Met Office hinted the upcoming winter could be mild, but an updated forecast September 21 moved away from this hint and said "there are signs that the trend towards a colder winter outlook may continue." Nor are the new supplies simple additions to the total supply available last year. Rather, they are necessary compensation to replace declining UK gas output, expected to fall from a maximum 269 million cu m/day last winter to 240 million cu m/day this winter, according to National Grid. OFGEM has warned in particular that a cold snap in November or December could leave the market exposed, as in a price spike in November 2005. The BBL and Excelerate projects are not expected until December at the earliest. And continental gas companies last year proved unwilling to send much gas through the Interconnector pipeline to the UK during the first half of winter, until they knew how much storage gas they would need to keep for their own needs. 3.10.06