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EU race to fill gas storage draws record supplies from Britain

Commodities Jun 29, 2022 13:56
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© Reuters. FILE PHOTO: A section of gas pipeline is seen at a National Grid facility near Knutsford, Britain, October 11, 2021. REUTERS/Phil Noble

By Susanna Twidale

LONDON (Reuters) - Britain has since the end of March exported record amounts of gas to Europe, the National Grid (LON:NG) said on Wednesday, as EU countries seek to fill their gas reserves to protect against any further interruptions in flows from Russia.

Britain often has gas to spare during the lower demand summer months and very little storage.

As a result around 75 million cubic metres (mcm) per day have been flowing to Europe, a spokesperson for the National Grid, which oversees the country's energy supplies, told Reuters.

The spokesperson, without giving further figures, said if the flow rates continued until September, they could account for around 15% of Europe’s strategic gas storage.

Britain relies on Russia for only 4% of its gas, but if British supplies become strained it has the option of redirecting flows through its two gas interconnections to Europe - one to Belgium and the other to the Netherlands.

The spokesperson said that would be "a last resort," adding it was highly unlikely to happen as high prices in Britain usually determine gas flows.

Wholesale British gas prices have historically been higher than in mainland Europe in the peak demand winter season, in part because of its lack of storage. It also relies more than Europe on imported liquefied natural gas (LNG), which has been drawn to Britain by infrastructure and price incentives.

But the crisis over Russia's invasion of Ukraine that began on Feb. 24 and Europe's race to fill gas tanks has driven European gas prices to record levels, encouraging flows away from Britain.

Many EU countries have yet to build up LNG infrastructure, notably Germany, Europe's biggest economy, which has activated the second phase of its emergency gas plan following reductions in supplies from Russia.

Germany has plentiful storage, however, which it is racing to fill to at least 90% full by Nov. 1.

The European Union as a whole, which historically relied on Russia for around 40% of its gas, aims to end reliance on Russian fossil fuels by 2027.

It has accused Moscow of using energy as a weapon, while Moscow has said cuts to flows of gas through the Nord Stream pipline to Germany are the result of the delayed return of equipment being serviced by Germany's Siemens Energy in Canada.

Moscow has also cut flows to Bulgaria, Poland, Finland, Danish supplier Orsted, Dutch firm Gasterra and Shell (LON:RDSa) for its German contracts.

Britain will conduct an exercise in September, as it does each year, ahead of winter with the grid, the government, the country’s energy regulator and the health and safety executive to ensure its gas emergency planning reflects the current circumstances.

In the event of any shortage, the grid would first issue notices to the market to try to attract more gas and could then curb industrial gas use to make sure households remain connected. It would only consider intervening in interconnector flows once other options had been exhausted, the spokesperson said.

EU race to fill gas storage draws record supplies from Britain
 

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