Page 5 - EurOil Week 07 2022

EurOil COMMENTARY EurOil

UK unlikely to face physical

shortage if Russian gas to

Europe disrupted: OIES

But prices will soar, as they will across Europe,

if Russian gas supplies are disrupted

UK THE UK would be unlikely to face a physical LNG cargoes and re-exporting them.”
shortage of gas supply in the event of a disrup- The UK’s role as a ‘land bridge’ might make
WHAT: tion in Russian gas flow to Europe, experts at physically balancing the UK transmission sys-
The UK would not face the Oxford Institute for Energy Studies (OIES) tem more difficult, and could increase volatility,
a physical gas shortage argue in a report published on February 11. But according to OIES.
if Russian gas flow was the country would face a “ripple effect” of price The experts also stressed that post-Brexit, the
disrupted. increases as a result of more serious scarcity on solidarity principles that apply to EU member
the European mainland, they warn. states, allowing them to deliver gas to each oth-
WHY: There are several reasons why gas supply to er’s most vulnerable consumers in the event of an
Prices would soar, Europe might be disrupted, the OIES experts emergency, no longer apply.
however, and the UK say, while noting that they consider any partial “It is highly likely that, absent government
could not count on or full curtailment in supply as unlikely. Those intervention to prevent the free flow of gas, pric-
Norway to make up the reasons include EU and US sanctions on Rus- ing signals would draw gas from one market area
difference. sian energy, counter-sanctions that Moscow to another,” the research states.
could introduce in retaliation, and damage The experts add that timing is of the essence,
WHAT NEXT: caused to the pipelines that deliver Russian gas as the UK’s low storage capacity would mean that
The UK does not have via Ukraine, as a result of conflict. a disruption before the end of winter would pose
the same priniciple of In 2021, imports accounted for 87% of gas a far greater challenge.
solidarity as the EU, supply to the EU and UK, with Russia serving as “If a military conflict does lead to a disrup-
which poses a risk. the largest external supplier, accounting for 35%. tion of Russian supplies to Europe, the UK might
However, the UK benefits from having substan- not face a physical shortage, but the impact on
tial production of its own, which met 40% of its wholesale (and by extension, retail) gas prices
demand, and pipeline connections with Norway. will be substantial, and due to its impact on the
In the event of a disruption, the constraint on power generation, commercial and residential
how much extra Norwegian gas supply could heating, and industrial sectors, will contribute
be tapped would not relate to infrastructure but to inflationary pressures at a time when the UK
to production, according to OIES, given that is already facing challenging economic circum-
Norway also sends a lot of gas to continental stances,” the experts conclude. ™
Europe. The UK also has ample access to LNG,
at terminals that have comparatively low levels
of utilisation.
While physical shortages are unlikely, OIES’
experts note that “any disruption to Russian
supplies to the European market will generate a
severe price spike that will filter through to the
UK market.”
“In physical flow terms, higher prices in con-
tinental Europe would draw gas away from the
UK through the Interconnector and BBL pipe-
lines,” the experts argue. “To the extent that LNG
cargoes are available on the global market, capac-
ity is available at UK LNG import terminals, and
capacity is available on the Interconnector and
BBL pipelines, the UK would become a ‘land
bridge’ to North-Western Europe, regasifying

Week 07 17•February•2022 www. NEWSBASE .com P5