The UK now has too much gas (and nowhere to put it)

May 25, 2022 | Electricity & Gas, News | 0 comments

As ridiculous as that sounds, it’s true. While households across the UK are struggling to make ends meet with soaring energy bills and general living costs as a product of record wholesale energy prices last winter, the UK now has so much gas that current imports have to be limited. In fact, the UK wholesale gas price has fallen from 454p per therm in early March to 137p per therm yesterday.

 

Why is there too much gas?

You might recall that just a few months ago the UK was at risk of energy shortages, and that’s because of the very reason we now have more gas than we can handle – the UK has some of Europe’s lowest gas storage capacity.

 

Understanding the present gas market

To turn natural liquefied natural gas (LNG) into energy for consumption, infrastructures are needed to receive, transport and convert the LNG through “regasification”, where liquefied gas is heated to turn it into its gaseous state. This process takes place in the LNG terminals.

Across Europe, the Baltic and the Black Sea there is a network of pipelines that bring Russian gas into central Europe, covering around half of the area’s total usage. Since the beginning of Russia’s invasion of Ukraine Europe has been making efforts to reduce its reliance on Russian gas as much as possible.

 

With the North Sea and Norway already extracting as much gas as they can countries are now left with the only alternative: purchasing gas from further away and transporting it via tanker. However, when transporting liquefied gas into Europe LNG terminals are still needed to receive it. At present, there are only three major terminals in the UK, with four in France and none in the rest of Europe.

 

From importing to exporting

Liquefied gas has been in much higher demand in Europe since the beginning of the energy crisis, leading to more shipments than the current infrastructure can manage. While the UK is trying to help as much as possible, terminals are now already running at 20% above capacity exporting gas through pipelines towards Europe.

 

As a result, the UK is temporarily a major exporter of electricity to Europe, supplying energy at a rate of more than four gigawatts. As wholesale gas prices have come down, power generators are now producing as much electricity as they can in gas-fired power stations.

 

What does this mean for my bills?

Though wholesale gas prices are at the lowest they have been for a while, domestic customers are unlikely to benefit from it as energy suppliers usually sign energy contracts for months or even years in advance.

 

There is good news though – countries in northern Europe including Germany and the Netherlands are taking action to accommodate more LNG deliveries in the future. With more storage available in Europe, the energy supply in the region will be more secure, hopefully preventing future crises and keeping winter bills down.

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