UK to import gas from the east through pipeline

Dec 14, 2004 01:00 AM

As the UK's North Sea gas production diminishes, new players will replace the oil majors in supplying gas to the UK. With the development of gas transportation infrastructure by 2007, gas will be imported from the east direct to the UK. This will allow Germany's E.ON Ruhrgas and Wingas access to the UK market, possibly replacing existing industrial gas suppliers, such as BP, Total and Shell.
The UK is to move from a position of self-sufficiency to net gas import status by 2006 as piped gas from Belgium, The Netherlands and Norway and global LNG volumes replace domestic production. To facilitate the transportation of large volumes of gas, significant investment in transportation infrastructure is being undertaken, alongside the provision of third party access to gas networks and the development of trading hubs.

Two key developments are the Balgzand-Bacton (BBL) gas interconnector between The Netherlands and the UK, and the development of a trading hub in The Netherlands, known as Eurohub, which is being supplemented by the building of a high calorific gas link between The Netherlands and Germany.
Once these projects are completed, the direct link between eastern Europe and the UK will be in place, enabling German gas wholesalers, such as E.ON Ruhrgas and Wingas, and other producers elsewhere in the region, principally Russia's Gazprom, to transport gas directly from eastern Europe to the UK.

At present the largest gas suppliers to end consumers in the UK are the oil majors, utilizing their retail customer base as a hedge against movements in the UK wholesale price for gas. Once these companies' North Sea production reduces, the necessity of having the retail/wholesale hedge will diminish, and companies with access to wholesale gas will have greater retail power.
It can therefore be expected that companies such as E.ON Ruhrgas, Gazprom and Statoil will start to exercise the capability provided by the emerging pan-European transportation and trading infrastructure to access new markets.

It should also allow UK energy retailers that have been developing residential and SME gas businesses to start to compete more robustly in the l&C market.
In the meantime, 2006-7 gas import capacity on the BBL interconnector is going spare. It will be interesting to see which company accompanies Centrica in importing wholesale gas volumes from The Netherlands.

Source: Datamonitor
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