Page 9 - GLNG Week 07 2022

GLNG EUROPE GLNG

UK unlikely to face physical shortage if

Russian gas flow to Europe disrupted: OIES

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

Week 07 18•February•2022 www. NEWSBASE .com P9