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U.K. gas supply gets LNG relief from Qatar as cold bites stocks

Workmen clear a snow drift blocking the Cushendall Road in Northern Ireland as wintry weather continues to cause havoc across the United Kingdom, March 24, 2013.


Three big Qatari liquefied natural gas deliveries should help replenish vital heating supplies for snow-covered Britain this week, but U.K. gas stocks remain uncomfortably tight with weeks of abnormally cold weather still to come.

A late blast of winter weather has drained Britain's already modest gas stocks to around a tenth of their capacity, sparking fears of supply restrictions with the cold weather forecast to continue into early April.

The first of a trio of tanker loads of super-cooled gas from the world's largest LNG exporter docked at the Isle of Grain terminal near London on Sunday, with a second due in Wales on Monday and a third on Friday, tracking data on Reuters shows.

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The Qatari tankers could supply a total of around 430 million cubic metres (mcm) of gas to Britain over the next week, compared with daily gas demand of around 370 mcm, while another tanker has set sail from Trinidad on Saturday after U.K. gas prices jumped on Friday when a key supply link from Belgium shut unexpectedly for 8 hours.

"We get our supplies from a diverse range of sources and the market is proving to be highly responsive to the U.K.'s needs," Energy Minister John Hayes said in statement on Sunday afternoon.

"A shipment of liquefied natural gas arrived today and two more are due over the coming week," he said, adding that good supplies by pipeline from Europe and the U.K.'s own North Sea platforms had allowed some replenishment of U.K. gas stocks over the weekend.

With little LNG coming to the U.K. over the last few months, and bitterly cold weather driving up heating demand, U.K. gas stocks have been drained to just 10-per-cent capacity.

A slight dip in demand over the weekend, when gas use by industry falls, helped replenish gas stocks by about 7 mcm from Saturday to around 453 mcm on Sunday, according to data from National Grid.

The arrival of a trio of large LNG tankers from the Gulf and the expected delivery around April 3 of a rare cargo from Trinidad could allay some jitters over very low U.K. stocks.

But it may take sustained high U.K. wholesale gas prices to lure many more gas tankers away from consistently higher-paying buyers in Asia to the U.K.

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The Trinidad delivery could add another 80 mcm of gas to U.K. supply in the first week of April, but there are mounting concerns that more will be needed to supplement supply from the North Sea if gas stocks dry up completely as winter drags on.

According to Reuters analysis of AIS data transmitted by the world's fleet of LNG tankers on Sunday, there were no other ships indicating that they are heading to Britain.

It is possible that tankers currently sailing to the Americas from African or Middle Eastern producers could be diverted to Britain to cash in on the surge in U.K. gas prices at the end of last week.

There is no sign of any more Qatari LNG ships heading to Britain in the Mediterranean.

Two vessels sailing from Qatar towards the Suez Canal are not indicating their final destination, but even if they do head to Britain, the Al Hamla is at least 12 days sail away while the Al Areesh is 15 days away from boosting Britain's gas supplies.

But Britain also has an additional 358 mcm of gas – almost a day of its total gas needs – still held as LNG in storage tanks at U.K. import terminals.

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The U.K., a net gas exporter until 2004, has become increasingly dependent on imports as its own production from the North Sea has declined rapidly over the last decade.

In a bid to diversify supply sources, it built some of Europe's largest LNG terminals in the middle of the last decade.

Until last year the two terminals in Wales and an older facility near London were big contributors to Britain's gas supplies and helped boost north-west European supplies through a link to Belgium.

A temporary flood of LNG in 2009-10 led to some new U.K. gas storage projects being put on hold as apparently plentiful supplies of LNG, especially from Qatar, challenged the economics of stocking gas in summer for use in the winter.

But LNG's share of U.K. gas supplies has shrunk significantly over the last year, as competition for finite Qatari LNG has intensified from high paying buyers in Asia while new LNG consuming markets have absorbed supply from producers in the Atlantic basin.

Much of continental Europe still gets its gas on long-term contracts from Russia and Norway, but Britain's supplies depend on U.K. market prices being more attractive to foreign suppliers than other markets.

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