Reino Unido : January 20, 2009

The recent commercial dispute between Russia Gazprom and the Ukraine has highlighted how exposed certain parts of Europe are to gas supply interruptions. Certain countries including Austria, Bulgaria, and Greece, which rely heavily upon Russian gas supplies, have been without product for over a week during a particularly cold winter. Russia supplies approximately 23 percent of the total EU27 gas consumption, with Germany importing 38.5 percent of its requirement from Russia, compared to France at 20 percent and the UK at 2 percent.

While these statistics underscore how vulnerable France and Germany are to Russia for their gas supplies, both countries have extensive gas storage facilities – 24 and 21 percent of their annual gas demand respectively. The UK, on the other hand, only has sufficient storage to 4 percent of its average annual gas demand – an approximate 14 days supply. Although one could argue that the UK imports very little gas from Russia, its lack of storage highlights its exposure to supply disruptions caused by either commercial dispute or mechanical failure.

The UK’s main gas storage facility is owned by Centrica (British Gas) and is located in a partially depleted North Sea gas field known as the Rough. This facility has a storage capacity of 35 TWh with a maximum daily delivery rate of 455 GWh which is approximately 10 percent of the UK’s peak demand.

The Rough facility accounts for around 68 percent of the UK gas storage with the other ten facilities being a mixture of salt caverns, depleted onshore gas fields and LNG tank farms. There are a number of additional facilities either under construction or in the planning stage.

The great step towards greater supply security will be achieved through the various LNG terminals that are being built around the country. These facilities will accept supply vessels from North Africa, the Middle East and the West Indies to supplement the UK’s existing North Sea pipeline supplies for the UK Continental Shelf and Norwegian fields.

The recent commissioning of the second state of the Isle of Grain terminal in the Thames Estuary seemed to provide the buffer required to prevent any significant increase in UK gas prices arising from the temporary dislocation of gas supply from Russia. In the future it is hoped that LNG supplies will provide the UK with extra capacity and an even greater measure of security in terms of its gas supplies.