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Last Updated: Friday, 18 November 2005, 14:01 GMT
Supply fears amid gas price surge
Electricity pylon
Gas problems also affect electrical supplies
Prices of wholesale gas have almost doubled during the past week, prompting fears about winter supplies to the UK.

Prices hit an eight month high of 80p a therm, sharply higher than last week's price of 43p, before dipping slightly.

Experts said fears the UK is about to face its coldest winter in 10 years and tight supplies had triggered the rise.

UK supplies are low as a pipeline from Europe is running at half capacity and shiploads of gas are being diverted to Spain and the US where prices are high.

Wood Mackenzie gas analyst Frank Harris told the Financial Times that operators could have made up to $14m more per cargo by selling to the US rather than the UK.

Liquefied natural gas is in a tanker, it can go anywhere in the world and other people at the moment have been paying more for it
Russel Hayes, BBC

The UK is also facing the prospect of becoming a net importer of gas as supplies from the North Sea dwindle.

Such developments have prompted gas operators to draw down supplies from the country's biggest storage facility - the Rough offshore facility - that is normally filled now for use in January and February.

Surging demand

In an effort to rectify the UK's supply problems, a new pipeline connecting the UK to Norway is currently under construction but will not be completed until next winter.

Meanwhile two liquefied natural gas terminals are being built in Milford Haven but they will not be ready until 2007 and 2008.

"We don't have enough additional facilities we need to get the gas in that we need at the moment," BBC correspondent Russel Hayes explained.

"The trouble is we actually don't have a God-given right to buy gas from elsewhere. Liquefied natural gas is in a tanker, it can go anywhere in the world and other people at the moment have been paying more for it."

Gas is important not just for domestic heating, but also for manufacturing and electricity supplies.

The government is currently reviewing the UK's energy supplies, looking into reducing carbon dioxide emissions, improving power supplies and examining calls for increased nuclear power.

Cut off?

In recent months manufacturers have been warning that dwindling supplies and higher prices are posing a big problem.

Suppliers have warned that so-called interruptible supplies to factories could be switched off - meaning harsh economic consequences for the firms affected.

One company, chemical manufacturer Ineos, has already cut production at its plant in Cheshire in an effort to cut back on consumption.

Domestic users could face even more increases on their bills.

Npower, Scottish & Southern and Scottish Power are among a number of utility firms to raise tariffs in recent weeks

However, while the wallets of UK consumers may feel the squeeze experts do not believe the lights will go out.

"That's almost inconceivable, I think that worst that can happen if we have a very prolonged cold snap is that producers will reduce the voltage a bit so the lights will be a bit dimmer," the BBC's Russel Hayes added.




SEE ALSO:
EU threatens action on gas prices
15 Nov 05 |  Business
Watchdog makes energy price plea
27 Sep 05 |  Business
Does switching still save cash?
15 Sep 05 |  Business
Power customers facing price hike
29 Jul 05 |  Business


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