UK gas storage capacity slashed

A couple of weeks ago Centrica Storage quietly made an announcement on its website:

As part of CSL’s assurance programme and as a responsible operator and given the age of the field and installation, CSL has decided to limit the maximum operating pressure of the Rough wells to 3000 psi. CSL has decided to take the prudent step to test and verify the operating parameters of the Rough wells. It is anticipated that this limitation will last up to 6 months.

 Rough is an undersea gas storage facility, connected by pipeline to the terminal at Easington in Yorkshire:

It's able to store about 4 billion cubic metres of gas - or at least it was before the above announcement. Some more detail from Platts indicates that the reduction in operating pressure will reduce Rough's capacity by about a quarter. Because Rough comprises about 72% of the UK's total gas storage, this is equivalent to losing just under 20% from total storage capacity.

Now, Centrica Storage has said this is for six months, while tests are carried out, but Platts notes that the tests are needed because of concerns about well integrity - so it's possible that the capacity will be permanently reduced. Even if it isn't, the coming six months are exactly when the storage is normally refilled, so if full capacity is restored at the end of the testing period, it may well be too late to completely fill the storage.

So, let's assume the UK goes into next winter with 1 billion cubic metres of gas less in storage than usual - what might the impact be? 2013/14 was a mild winter, and Rough still had over 1.5 billion cubic metres left in it in March 2014. It was a different matter in April 2013, when it had actually gone below 'zero', eating into the gas cushion that was supposed to be left untouched. This year, there's about 0.5 billion cubic meters left in it right now - the situation was similar every year from 2008-2011 inclusive. This means that if the coming winter is mild, we should have no problems; if it is average, then we will probably need to increase imports, which will bump up prices; if it is cold, then we could well have a problem.

The graph below shows the levels in Rough over the past few years in GWh (10 GWh is about the same as 1 million cubic metres), so you can see the situation for yourself. Any year where the level dropped below 10,000 GWh is a year when the announced capacity reduction might have been a problem:


Let's hope and pray for a mild winter!

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UK gas supply and prices for winter 2013/14

Yeah, yeah, I know summer's not even started yet, but the UK gas markets are already planning ahead to next winter. Time to take a first look at how things are shaping up...

As you will remember, winter dragged on a bit this year in the UK, and it was only seven weeks ago that our gas supplies were running on empty. As I noted at the time, this leaves us with a problem, as there is now not enough time to easily refill the long range gas storage before next winter, as there are technical limits to how fast gas can be injected back into the store at Rough.

To illustrate the problem here's a graph showing long range gas stock levels for the past few years (click for a larger version):

As you can see, we are starting from an all-time low and are several weeks behind the next worst case (which was 2010). Here's another graph showing the rate at which gas has been injected into Rough since the cold weather stopped:

Centrica have actually been making a good effort to get gas in there as fast as possible, actually setting a new record on 1 May, but there have still been some blips due to cold weather or other issues that have slowed things down.

So how has this been affecting price? The exceptionally low storage level following last winter represents itself as extra demand in the gas market between now and next winter, so it's no surprise that average wholesale prices are up 23% for the year to date compared to 2012:

This can only translate into higher bills eventually, although the bumper profits made last winter may result in a short delay before this happens. Boosted gas prices will feed through into electricity prices too.

So what can you do? Well, the message hasn't changed - insulate and draught-proof your house, upgrade your heating controls and thermostats, get a new boiler if you need to. Switching supplier will make little difference, especially in the long run, so the only answer is to use less gas.

I'll post more updates over the summer when I see how things are going in preparation for the coming winter.

Mike

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Keeping an eye on UK gas supply...

Although winter should be nearly over in the UK, it's still pretty cold, and has been for much of the time since early January. As a result, while UK gas storage was looking pretty healthy earlier in the winter, it's now (again) at the point where it needs to warm up pretty soon or there are going to be some demand reductions enforced on industry.

The trigger level for issuing a Gas Demand Warning has fallen from 473 mcm/day (million cubic metres of gas per day) as recently as 9 Feb 2013 to only 395 mcm/day for 27 Feb 2013. Although demand is some way short of that (352mcm on 26 Feb), the gap between demand and trigger is now tighter than it has been at any other point so far this winter.

This is underlined by the amount of storage left at present (26 Feb):

• Long range: 8,931 GWh out of ~40,000 max
• Medium range: 2,871 GWh out of ~12,000 max
• Short range: 203 GWh out of ~350 max

For comparison, that total GWh storage is equivalent to about 1,100 mcm, or just over three days gas at present consumption. So as you can see, it only takes one industrial accident or a change in gas trading to cause a problem. Let's hope it warms up soon...

If you'd like to view the raw data for the above yourself, you can view the 'Prevailing View', which summarises the current state of the gas system, here. Screenshot:

Also useful are the Entry Zone Graphs, which allow you to view the last few minutes, hour or 24 hours of gas supply, including that coming out of storage. Screenshot:

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Update on UK gas supplies

About a month ago I posted about the UK's gas supplies, and whether we'd run low this winter. Well, the good news is that January has been much milder than December was, allowing the withdrawals from UK gas storage to slow, and even for some gas to be injected for a short while, as can be seen from the graphs below for long, medium and short range storage:

As you can see, medium range stocks are now around the level they were a year ago, but long and short range stocks are still lower.

As I mentioned in my earlier post, there have often been incidents during past winters that have affected the gas supply, and this year is no exception. A gas processing plant that only returned to almost full capacity on 6th Jan 2011 after technical problems again ran into trouble on on 20th Jan. And the latest development is that Norwegian company Statoil has reduced output from the large Troll gas field while "planned short-term repair work" is carried out, which apparently should take less than a week. However, this has already significantly reduced gas supply to the UK through the Langeled pipeline, from the usual 70 mcm/day to under 40 at the time of writing. This comes during a slightly colder week in the UK, so is likely to result in gas storage being depleted further still.

Now we've had a mild-ish January, the situation is not as dire as it looked at the end of December 2010, but we're not out of the woods yet. Hopefully the companies responsible for managing our gas supply and storage, namely National Grid and Centrica, will act to ensure that a safe level of gas stocks is maintained through until the end of March, when hopefully it will be much warmer.

Mike

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The UK media wakes up to our low gas stocks

Finally, the mainstream UK media has realised that there may be a problem with gas supplies, even though I wrote about it a few weeks ago. The Guardian says:

The amount of gas kept in storage in the UK is at its lowest level in five years for so early in the winter, according to National Grid.

Last month, was the coldest December since 1890, and the UK's gas storage facilities, which are among the smallest in Europe, are already more than half empty as they cope with record demand. Domestic supplies of gas have also been exported to the continent via the Interconnector under-sea pipeline, because prices are higher there than in the UK.

Full story

Thanks to PowerSwitch for the tip on the story.

On a related note, the weather's been less cold in January so far, but on most days we have still been withdrawing gas from the long range storage at Rough, while reducing imports from their peak levels. A more cautious approach would be to keep imports up and stop withdrawing from storage, or better yet, inject gas back into storage. But that isn't the most profitable way of operating, so our gas security suffers instead.

Still, the milder weather has bought us a bit of time, but the risk to supplies still depends on what happens with the weather over the coming weeks.

Mike

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Will the UK run out of gas in February 2011?

We won't "run out", but we could well have shortages. Here's why...

First, it's important to understand the overall picture. The UK had been a gas exporter from the mid-nineties until a few years ago, but now production from the North Sea has been plummeting for over five years, we're a significant importer. The graph below illustrates this - when the blue line is above the yellow, we were a net exporter, when it is below, we were a net importer. Click it for a larger version.


Gas supply in the UK comes from several sources at present:

• Production from the North Sea
• Imports from Norway via the Langeled pipeline
• The Interconnector, bringing gas from Zeebrugge in Belgium to Bacton in England. This can also export gas from the UK back to Belgium.
• The BBL pipeline, which brings gas from the Netherlands to Bacton in England.
• Liquefied Natural Gas (LNG) imports, through a range of terminals.
• Storage facilities in the UK, which are generally filled in the summer and drawn from in the winter.

Each of these sources of gas has key strengths and weaknesses, such as:

• North Sea production is a secure supply, but meets less than half of peak winter gas demand in the UK. As with any supply, it is susceptible to accidents and malfunctions, such as this one in 2007.
• The Langeled pipeline can supply about 70 mcm (million cubic metres) a day at maximum rate, or about 15% of the UK peak demand during December 2010. Without this supply, the UK would not have enough gas, and its failure for a period in January 2010 caused the National Grid to issue several Gas Balancing Alerts and resulted in a surge in prices. At present, it is operating with no problems.
• The Interconnector and BBL pipeline are vital when we need extra gas, but to get it the UK has to pay a price determined by supply and demand in the rest of Europe. The BBL can supply up to 45 mcm/day, while the Interconnector can supply up to 58 mcm/day. When supply problems occur in Europe, as they have in the past due to disagreements between Russia and Ukraine, then the availability of gas imports is reduced. There is also the risk of malfunctions, such as the fire in 2008.
• LNG imports to the UK started quite recently, as the decline of North Sea production made them necessary. As with other imports, they are susceptible to malfunctions and also lack of supply if the market is short of gas. The peak supply during December 2010 has been a bit over 100 mcm/day.
• Finally, storage has been supplying about 10 to 15% of UK gas demand in December 2010. It can supply more, but only for a short period of time, as supplies will deplete quickly. Storage is split into long, medium and short range stores. The former are large in volume, while the latter are small and only for use during exceptionally high demand. There are two risks for storage. The first is technical faults, which have happened in Feb 2006 and Nov 2010. These are serious enough that even small glitches can push prices up, such as in early Dec 2010. The second risk is that the storage simply does not have enough gas in it - this is what will now be examined in more detail.

Current state of UK gas storage

You can view the current amount of gas in storage, and various other bits of technical info, on a website run by the National Grid. Click the help link on that page for more info.

However, what's more interesting is to be able to look at the levels of gas storage this winter so far, and compare them to a year ago. It's quite a bit of work to get the data for this and make some charts, so I've done it for you. The following charts show long, medium and short range storage levels from October through to September, with the red line representing this winter, and the blue line winter 2009-10. Again, click for larger versions.






There are several things to note from these graphs:

• At the end of winter, around March 2010, gas storage was at a low level.
• All three classes of storage started off a a lower level in October 2010 than in October 2009, indicating that insufficient gas was injected over the summer to make up for the previous cold winter.
• In late December 2010, storage is well below the levels seen a year ago.

At present (late December 2010), gas storage is about 52% full, while a year ago it was about 85% full. If the remainder of the 2010-11 winter remains cold, or even just colder than average, then gas storage could well be completely depleted before winter ends.

If withdrawals from storage continue at the average rate for December 2010 so far, there are only 45 days of stocks remaining.

So what will happen when stocks get low?

Supply to domestic customers will be guaranteed if at all possible, as the industry and government can not afford to have many thousands of people without heating in the winter, not to mention the technical difficulties with shutting off large areas of the gas network. The procedure that is followed is detailed on government and National Grid websites, such as this presentation.

The stages are:

• Gas Balancing Alert, to encourage extra supply and reduced demand through normal operation of the gas market. We've already had these on two days during December 2010, simply due to cold weather resulting in high gas demand.
• Stage 1 (potential emergency): Relax the specification on energy content of gas in the network, maximise use of gas under pressure within national pipelines (linepack), instruct customers on interruptible gas supply contracts to stop using gas. Public appeals to reduce gas use may be used.
• Stage 2 (Declaration of emergency): all suppliers are instructed to maximise supplies, and storage will maximise output until levels fall to a predetermined point. Normal gas market operations are suspended. Public appeals to reduce gas use may be used.
• Stage 3 (Firm load shedding): organisations (with some exceptions, e.g. hospitals) are instructed to reduce gas use. If voluntary reduction is not enough, gas supplies will be physically cut off, starting with the largest users. Public appeals to reduce gas use may be used.
• Stage 4 (System isolation): parts of the gas network will be isolated, resulting in no gas supply to any user in the affected areas.
• Stage 5: supplies are resumed when the emergency is over.

Let's hope it doesn't come to that. But be aware that the risk grows as long as the weather stays cold, and that any accident or malfunction in gas supplies could tip the system over the edge quite quickly, especially later in the winter.

Electricity

One final point - about 40% of our electricity in the UK is generated by burning gas, and these power stations could have their supply cut in an emergency. While other sources, such as coal and oil fired stations would be brought to maximum output, there could still be a shortfall, so a gas supply emergency implies an electricity shortage as well.

Links

Here are links to where I got the data from for the charts above, and where you can read more:

• National Grid: Prevailing View, with current status of the gas system.
• National Grid: Data Item Explorer, for historical data on all elements of the gas supply system. 
• National Grid: Entry Zone Graphs, with live views of the past 10 minutes, 60 minutes or 24 hours of gas supply.
• National Grid: Real-time electricity data.
• DECC: Government energy statistics on gas.

I'll probably do an update in a few weeks, when the effect of the weather has become clearer. In the meantime, consider what you might do in a gas supply emergency, and make appropriate preparations.

Mike

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North Sea cavern could double UK gas stockpiles

According to a story in the Telegraph, the Italian oil company Eni has been given permission to develop a gas storage facility in the North Sea. At about 4.6 billion cubic metres, it will roughly double the UK's gas storage capacity.

This is exactly the kind of thing we need as the North Sea gas output continues to plummet year after year, but it's worth bearing in mind that:

• Eni might not be in a hurry to develop it, given the economic situation.
• If it goes ahead, it still won't be ready until 2015, by which time our indigenous gas production will have fallen another 20% or so.
• If it goes ahead, we still have to import the gas, which assumes that there is enough available in the market, and that we can afford it.
• If it goes ahead, it will still only give us 20 days supply of peak winter demand.

So, what we really need to be doing is insulating our homes, turning down the thermostats and switching to non-fossil-fuel forms of heat. This is what I've done in my own house, installing cavity wall insulation, loft insulation, a woodburner and solar water heating.

Mike

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