UK Gas and Electricity Crisis Looming

Post by **clv101** » 20 Mar 2006, 09:04

mikepepler wrote:...while seasonal weekday demand is around 340-345mcm this week.

I don't really understand why demand is so low given that it's still so cold - I guess the electricity demand around 4pm is less now that it's getting lighter. But that alone can't explain why demand is 340 and not 370mcm. Demand for the last few days as been under the SND (Seasonal Normal Demand) - how is this possible when it's so much colder than the Seasonal Norm? Has there been a large amount of industrial demand destruction that the media hasn?t reported?

skeptik · Post by **skeptik** » 20 Mar 2006, 11:11

clv101 wrote:
mikepepler wrote: there been a large amount of industrial demand destruction that the media hasn?t reported?
I wouldnt be surprised. British Industry is packing its bags and going away, either to China or Eastern Europe. I have a friend who is being made redundant at the Mars chocolate factory in Slough this year after working there for 17 years. It is being packed up and sent to Latvia or Lithuania (or somwhere like that) where labour is cheaper and regulations less onerous. Mr Dyson packed up his vaccuum cleaner factory a while ago and headed out to China. High Gas prices have no doubt accellerated this trend.

The economy is still 'healthy' because all the new jobs New Labour has created in expanding the state sector and because of all the debt run up over the last few years on the back of rising house prices. This housing/ debtbubble does seem to be coming to an end now, both here and in the States.

Post by **mikepepler** » 20 Mar 2006, 14:43

biffvernon wrote:
mikepepler wrote: ...it's the price rises which will cause the drag on the economy we've all been predicting for so long and are now beginning to experience.
How does this 'drag on the economy' work? The increased amount of money spent on energy circulates through the economy, or is the gasman stuffing it under his mattress?

This is an important point. You're right that if the rising price is due to increased demand, then all that's happening is that money is going round-and-round faster, assuming that the gas companies spend their money in the UK. However, if the prices are rising (relative to previous years) because of declining North Sea supplies, then the extra (expensive) gas is coming in from abroad (via interconnector or LNG), so that the money paid for it is leaving the UK.

The same point can be made for non-conventional or hard-to-access oil and gas resources on a global level. If demand rises that just transfers money from importers to exporters, who in turn may well come and spend the money with the importers - so the global economy keeps motoring along (up to a point, I guess). However, if cheap supplies are replaced with supplies which actually cost more money (and energy!) to extract, process and transport, then you have less money/energy available for non-energy business.

RevdTess · Post by **RevdTess** » 20 Mar 2006, 15:04

clv101 wrote:Has there been a large amount of industrial demand destruction that the media hasn?t reported?

There have been reports on Reuters this morning that some industrial users had curbed their use of gas due to high prices, leading to a long gas system.

skeptik · Post by **skeptik** » 20 Mar 2006, 20:32

Tess wrote:
clv101 wrote:Has there been a large amount of industrial demand destruction that the media hasn?t reported?
There have been reports on Reuters this morning that some industrial users had curbed their use of gas due to high prices, leading to a long gas system.

and in the Grauniad a few days ago.

"Jeremy Nicholson, of the Energy Intensive Users Group (EIUG), which represents steel, glass and chemical manufacturers, said firms were having to cut production because of soaring costs."

http://business.guardian.co.uk/story/0,,1730891,00.html

Ballard · Post by **Ballard** » 20 Mar 2006, 21:49

Beautiful, supply and demand in perfect balance.

Ballard · Post by **Ballard** » 27 Mar 2006, 20:35

LONDON (Reuters) - Wholesale gas prices for next winter hit record highs on Monday on uncertainty about the future performance of the country's biggest gas storage site, which has been shut for weeks after a platform fire.

Power prices for next winter rose in line with gas but CO2 credits ended the day lower.

"Nobody wants to be short next winter because of the uncertainty about (storage site) Rough," said a gas trader for a bank.

Gas contracts for next winter surged two pence to a high of 88.50 pence a therm before easing to 87.75 pence. Final bills to households and businesses, which have rocketed in the last two years, are based on wholesale prices.

The offshore Rough
site, which accounts for 70 percent of Britain's storage capacity and is a key supplier of gas during spells of cold weather, has been shut since mid-February following a platform fire.

The site's owner, Centrica, said on Friday it estimated the site would be back to normal by October, the start of the winter season, though it stressed that date was subject to change. Previously Centrica had targeted a May restart.

Earlier this month spot prices for this winter soared to record highs as the closure of Rough hit supply during a spell of unusually cold weather.

Rallying prices for next winter sparked gains in other forward contracts. Gas for the winter after next gained 1.5 pence to 72 pence and winter 08 rose 1.4 pence to 63 pence.

Electricity for next winter also rallied, gaining 80 pence to 70.25 pounds a megawatt hour.

In spot trading, gas for delivery on Monday and Tuesday slipped as milder weather curbed demand. Within-day gas traded at 36 pence, off 6.5 pence from Friday's forward price for Monday. Gas for Tuesday traded at 42.75 pence.

CO2 emissions credits for December delivery fell 15 cents to 26.80 euros a tonne.

Reuters story

It's still LOOMING

Post by **clv101** » 27 Mar 2006, 21:06

What on earth happened there to take so long to fix!? When will injections be able to start? Is that normal operation and full by Oct or normal operation any only 57% full by Oct? Is it still 57% full? More questions than answers.

MacG · Post by **MacG** » 27 Mar 2006, 21:10

clv101 wrote:What on earth happened there to take so long to fix!? When will injections be able to start? Is that normal operation and full by Oct or normal operation any only 57% full by Oct? Is it still 57% full? More questions than answers.

Indeed an adequate reflexion! What the h*ll happened out there?

dr_doom · Post by **dr_doom** » 27 Mar 2006, 21:14

Maybe it blew up and they have to rebuild it again from scratch.

Pete_M · Post by **Pete_M** » 28 Mar 2006, 08:02

Sorry to ask a basic question - are the units in the Reuters quote above the same. ie

.....next winter surged two pence to a high of 88.50 pence a therm..

and

....In spot trading, gas for delivery on Monday and Tuesday slipped as milder weather curbed demand. Within-day gas traded at 36 pence..

I gues Im asking if the price of gas for next winter is going to be double the current price based on the above.

thanks

Pete M

Post by **clv101** » 28 Mar 2006, 08:46

When we had the price spike to 255 p/therm I worked out:

Our price of 255 pence/therm
There is 29.3 KWh/therm

Therefore 8.7 pence/KWh

So 88.5p/therm = 3p/KWh
and 36p/therm = 1.2p/KWh

The units are the same but most gas isn't traded on the spot market so there is only a loose correlation between these prices the price your gas retailer has paid and hence the price we'll be paying.

Pete_M · Post by **Pete_M** » 28 Mar 2006, 09:22

Chris Thanks for the info and context for the numbers.

Pete M

Andy Hunt · Post by **Andy Hunt** » 30 Mar 2006, 13:30

clv101 wrote:-

When will injections be able to start?

This is the critical question. If we can't start putting gas into storage until October, we will be starting the winter with our pitiful reserves only half-full.

THAT means BIG trouble!

PS_RalphW · Post by **PS_RalphW** » 30 Mar 2006, 15:06

Our current intention is to make injection capability operational before production. One critical element in restoring injection capability is the replacement of up to 30km of cabling. This work is underway. There are also two cooler units on the injection train which are identical in design to the cooler unit on the production train which failed. These cooler units cannot be bypassed and may be subject to inspection or modification requirements, following the investigation. Our current best estimate of the date of resumption of injection operation is 1st June 2006, although this remains subject to change.

On production, a number of options for recovery have been examined. Our current intention, subject to relevant HSE approvals and detailed design, is to bypass the production cooler units and glycol dehydration units offshore and to run the pipeline to shore wet. This should simplify offshore operations and potentially improve future reliability. It should also enable full production rates to be resumed before the next production season. Our current best estimate is that full production rates will be available at latest from 1st October 2006 although this also remains subject to change.

By the end of next week (31 March 2006) we hope to be in a position to report further on our recovery plans and will provide an updated assessment of the likely period of the outage then.

http://www.centrica-sl.co.uk/Storage/Me ... 0216i.html

PowerSwitch

UK Gas and Electricity Crisis Looming

Winter gas hits record highs