Britain’s imports of liquefied natural gas have slowed almost to a standstill this year, adding to the pressure on domestic prices, which have already risen by at least 15%. The sharp fall in LNG imports is an embarrassment for the government after heavy spending on the infrastructure needed to boost shipments to compensate for dwindling gas supplies from the North Sea. It also follows a drop in the level of gas imports from continental Europe in spite of higher prices in Britain. LNG is gas that has been converted to liquid to make it easier to transport. Imports over the winter are believed to be less than half of the previous year. The last LNG cargo to dock at the Isle of Grain terminal was at the end of January, though another shipment could arrive next week. LNG is sold as an international commodity with cargoes traded on a global basis. The price is set internationally and Britain has to compete with countries such as Japan and South Korea that are heavily reliant on oil and gas imports and are prepared to pay accordingly. Britain has spent heavily on building the necessary infrastructure – new LNG capacity is being built at Milford Haven, the world’s longest undersea pipeline, the Langaled pipeline, gives the UK access to one of Norway’s biggest gas fields and Britain now has access to continental European supplies through a pipeline to the Netherlands as well as the Belgian interconnector. But as Paul Golby, chief executive of E.ON UK, notes, building the infrastructure does not necessarily mean Britain will always get the gas it needs. “I think there has been a little naivety about gas infrastructure – an assumption that if the metal is there, the gas is going to flow,” he said. “That does not follow.” This month Thor Otto Lohne, the executive vice-president of the Norwegian pipeline company Gassco, reportedly warned an energy seminar that long-term contracts with continental European companies meant that: “the UK is a secondary priority. Like it or not, that is a fact”. Britain’s concerns about gas supply come as the world’s gas-producing nations meet today in Tehran to discuss forming an Opec-style grouping to influence prices. British consumer bodies have complained about high gas prices with bills rising by 15% this year. But whereas continental European companies can buy supplies from Britain, they are often reluctant to export even when prices are higher than in their home markets. The House of Commons business and enterprise committee and the industry regulator, Ofgem, have said they are looking at the UK market in the light of rising residential fuel bills. Craig Lowery, head of energy markets at the research company EIC, said long-run contracts and public-service obligations meant gas flows through the pipelines from continental Europe did not always respond to price signals, while Britain was geographically right at the end of the pipeline as far as westward gas flows were concerned. “If you build the infrastructure it does not guarantee that the gas is going to come. That is the commercial reality.” A Centrica spokesman said: “We are not getting enough gas into the UK, at least not without paying very high prices. We’re currently seeing a whole series of global circumstances and influences impacting on UK gas prices. “Not least, record oil prices are impacting directly on gas prices, because there is a direct linkage between the two, particularly in continental Europe. But we are also seeing heavy demand for LNG from the far east attracting shipments which might otherwise have come here, and also the ongoing impact of a dysfunctional European market sitting next to our highly competitive one. The market in which we buy our gas is now pretty much a worldwide one.” A spokesman for National Grid acknowledged there were uncertainties. “Having the capacity does not mean the molecules are going to arrive.” Britain, however, had the advantage over many other countries, he said, in that it has a diverse range of sources for gas. “We have our own indigenous supply; we can draw on the LNG market; we have the flow from Norway and from continental Europe.” The government sees gas as part of a balanced portfolio of energy sources which include new nuclear capacity, renewables and coal to replace existing generating capacity. Golby is keen to stress that because of the long lead times required to bring in new nuclear and coal plants, decisions need to be taken in the near future on how to meet the need for new generation. If those decisions are not taken within the next one or two years Britain risks “sleep walking” into a gas-dependent world or will suddenly realise that only another dash for gas will ensure Britain has enough power generation. Gas plants can be built much more quickly than nuclear or coal. New nuclear power plant could take 10 years to bring into service, coal between four to eight years. “The one thing we know we can do is build a gas-fired power station in probably two years,” Golby said. If gas plays a bigger than expected role in future, Britain will not be able to switch to alternatives as they become available. “There’s no way in five years we are going to turn to something else – that’s not a financial option,” Golby said. “Security of supply is not a simple issue. We have to think in terms of getting a balance of different types of supply because over-reliance on one is really dangerous.”

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