Dutch quake leaves UK gas mar­ket on shaky foun­da­tions

The Sunday Telegraph - Money & Business - - Business - By Jil­lian Am­brose

AN EARTH­QUAKE trig­gered by a gi­ant Dutch gas field has rocked the UK’S gas mar­ket in a fur­ther threat to en­ergy sup­plies that risks driv­ing gas bills higher.

The third-strong­est quake in Dutch his­tory reg­is­tered 3.4 on the Richter scale last week and has un­earthed fresh calls to wind down gas pro­duc­tion in the Nether­lands, which is Bri­tain’s third largest source of gas im­ports.

The gi­ant Gronin­gen gas field has helped make the Nether­lands the most im­por­tant gas mar­ket in Europe, but decades of drilling has rid­dled the north­ern Dutch town with earth­quakes for years.

The Dutch gas reg­u­la­tor has made an of­fi­cial ap­peal to min­is­ters to make “sub­stan­tial” gas pro­duc­tion cuts in their re­sponse to the Gronin­gen quake due next week.

“This could af­fect gas sup­ply to house­holds and busi­nesses, but we will not take that into ac­count. It is up to the min­is­ter to bal­ance safety and cer­tainty of sup­ply,” the reg­u­la­tor said.

The fresh gas sup­ply fears emerged just weeks af­ter UK gas prices surged to six-year highs af­ter a “per­fect storm” of sup­ply prob­lems hit the mar­ket in its first win­ter without the se­cu­rity of Bri­tain’s main gas stor­age fa­cil­ity. Dutch min­is­ters are only likely to shut six small clus­ters of gas wells be­fore the end of this win­ter but an ac­cel­er­a­tion of its plan to wind down gas pro­duc­tion is likely for the years ahead.

One UK en­ergy trader told The

Sun­day Tele­graph that a quicker than ex­pected de­cline in Dutch gas pro­duc­tion “adds weight to the se­cu­rity of sup­ply ques­tions raised as we in­creas­ingly rely on im­ports”.

The UK has shut its age­ing Rough gas stor­age fa­cil­ity, even as North Sea gas pro­duc­tion de­clines, in favour of im­port­ing gas from Europe, Nor­way and on the global mar­ket via su­per­chilled tankers of liq­ue­fied nat­u­ral gas (LNG).

A ma­jor North Sea pipe­line out­age last month co­in­cided with prob­lems at Nor­way’s off­shore gas ter­mi­nals, re­sult­ing in his­toric mar­ket price highs and lay­ing bare the ex­tent of the UK’S re­liance on im­ports. One UK gas buyer turned to Rus­sia for a cargo of arc­tic LNG. The UK typ­i­cally sources LNG from the Mid­dle East but buy­ing one­off car­goes is also likely to be­come more ex­pen­sive. China im­ported record vol­umes of LNG last year in a bid to wean its pol­luted cities off burn­ing coal, lift­ing Asian gas prices to sixyear highs. The UK will need to com­pete on price to lure car­goes away from lu­cra­tive Asian gas buy­ers.

Ben Sa­muel, of en­ergy data firm ICIS, said the mar­ket price re­ac­tion so far had been “muted” while traders wait to see how deep the pro­duc­tion cuts will go. But the long-term price for UK gas has none the less climbed 10pc higher than where it was last month ahead of the min­istry’s de­ci­sion.

“The Nether­lands is the bench­mark gas mar­ket in Europe, and the price­set­ter, so any­thing that hap­pens in the Nether­lands will in­evitably af­fect the rest of Europe and Bri­tain as well,” Mr Sa­muel warned.

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