Gas alert as demand and prices rise

[adam2]

We lost about 6 hours of ~70 mcm/d, so around 18 mcm or around 200 GWh. Our total remaining storage is around 5000 GWh, so even this 6hr outage will have taken a non trivial 4% bite out of our already very tight storage.

Yes, or put another way, had the storage been well filled than the loss would have been around 0.4% and of no consequence, being easily recovered.
Under present conditions though it is a bit more concerning especialy if it breaks again, or if something else goes wrong, or if the cold weather continues for longer than expected.

[kenneal - lagger]

If the jet stream forecast is right we have another 10 days or so of this cold weather.

[mikepepler]

I've done a write-up with graphs of gas flows through today:
http://peakoilupdate.blogspot.co.uk/201 ... -cope.html

Also mentioned in the above is the 40mcm/day Norwegian maintenance shutdown due to run from 1 April to 2 August...

[Tarrel]

Great write-up. Thank you.

[mikepepler]

Great write-up. Thank you.

Thanks, it's a pleasure - I actually enjoy digging into this stuff and writing it up, but knowing people read it too makes it even more worthwhile!

[mikepepler]

The good news is that although LNG and LRS were drawn down yesterday, the surplus gas after Bacton came back online was reinjected into MRS, so it was up by 6am today. Still, adding up all storage and LNG, we were down 300 GWh in the 24 hours to 6am today, or about 27mcm.

What's more alarming is the predicted demand for this week:
24/03/2013 345mcm
25/03/2013 373mcm
26/03/2013 369mcm
27/03/2013 371mcm
28/03/2013 368mcm

Bear in mind that the trigger level for a demand warning is 385mcm, but after several days at the above levels, the trigger will be lower. Data from: http://marketinformation.natgrid.co.uk/ ... gView.aspx

[adam2]

But the government said not to worry, so it is bound to be all right ?

I suspect that the market is in fact working and supplying more gas, but at what a price !
It is begining to look as though 80 pence a therm is the new normal rather than being a brief price spike.

I suspect that the price is being partly driven by the UK outbidding other potential customers due to the nearly empty storage.
The policy is probably something like "if storage levels are within a normal range, then only pay up to XX for imports. If storage drops below YY% then purchase any available imports regardless of price"

I forsee significant increases in retail gas prices.

[Blue Peter]

I suspect that the price is being partly driven by the UK outbidding other potential customers due to the nearly empty storage.
The policy is probably something like "if storage levels are within a normal range, then only pay up to XX for imports. If storage drops below YY% then purchase any available imports regardless of price"

Does that mean that somehow is losing out? or is more gas being produced?

In the former case, who? In the latter case, where from?

Peter.

[vtsnowedin]

I suspect that the price is being partly driven by the UK outbidding other potential customers due to the nearly empty storage.
The policy is probably something like "if storage levels are within a normal range, then only pay up to XX for imports. If storage drops below YY% then purchase any available imports regardless of price"

Does that mean that somehow is losing out? or is more gas being produced?

In the former case, who? In the latter case, where from?

Peter.

If the price goes high enough they will shut off some flares on oil wells and compress the gas they are wasting into LNG and ship it to you. Gas could be £2.00 per therm and still be cheaper then the equivalent amount of oil.

[Tarrel]

I suspect that the price is being partly driven by the UK outbidding other potential customers due to the nearly empty storage.
The policy is probably something like "if storage levels are within a normal range, then only pay up to XX for imports. If storage drops below YY% then purchase any available imports regardless of price"

Does that mean that somehow is losing out? or is more gas being produced?

In the former case, who? In the latter case, where from?

Peter.

If the price goes high enough they will shut off some flares on oil wells and compress the gas they are wasting into LNG and ship it to you. Gas could be £2.00 per therm and still be cheaper then the equivalent amount of oil.

I don't think that's quite true, as we are talking wholesale prices here. £2.00 per therm equates to around 7 pence per kWh wholesale. I pay 7 pence per kWh for the heating oil in my tank. That's retail, including the VAT and delivery to my house. (Based on 70p per litre and around 10 kWh per litre of heating oil). By comparison, smokeless coal is around 4.5 pence per kWh delivered and electricity is around 14 pence per kWh.

[vtsnowedin]

[I don't think that's quite true, as we are talking wholesale prices here. £2.00 per therm equates to around 7 pence per kWh wholesale. I pay 7 pence per kWh for the heating oil in my tank. That's retail, including the VAT and delivery to my house. (Based on 70p per litre and around 10 kWh per litre of heating oil). By comparison, smokeless coal is around 4.5 pence per kWh delivered and electricity is around 14 pence per kWh.

Point taken but 7=7 in my book and retail vs. wholesale margins might well get eaten up by changes in crude prices if gas rose to £2.00.
Close enough for the debate here I'd think.
My point is that local supply and transport conditions that create the spread in price between the different types of fuel will diminish in importance and the gap should narrow as shortages of one type are made up by switching to another form of fuel.

[mikepepler]

LNG to the rescue - but I wonder what the cost is...
http://peakoilupdate.blogspot.com/2013/ ... -week.html

[biffvernon]

The cost has got to be greater than the cost of wind generated electricity - if only we had greater installed capacity. We just had three days of continuous 5GW wind and now its dropped to four and a half. That will have been worth a lot of gas.

[adam2]

The cost has got to be greater than the cost of wind generated electricity - if only we had greater installed capacity. We just had three days of continuous 5GW wind and now its dropped to four and a half. That will have been worth a lot of gas.

Yes, and a wind turbine paid for now will generate power at a substantialy fixed cost for years.
But imported natural gas is likely to significantly increase in cost over the coming years.

Also wind power produced within our own country is much less vulnerable to war, coup, revolt, riot, accident, terrorism, or industrial disputes than is imported gas.

We will almost certainly still need to import SOME gas, but more wind power would the reduce the amount needed.
A lower average rate of gas consumption would also mean that our limited storage would last for longer in the event of any disruption to imports.

[Tarrel]

The cost has got to be greater than the cost of wind generated electricity - if only we had greater installed capacity. We just had three days of continuous 5GW wind and now its dropped to four and a half. That will have been worth a lot of gas.

Yes, and a wind turbine paid for now will generate power at a substantialy fixed cost for years.
But imported natural gas is likely to significantly increase in cost over the coming years.

Also wind power produced within our own country is much less vulnerable to war, coup, revolt, riot, accident, terrorism, or industrial disputes than is imported gas.

We will almost certainly still need to import SOME gas, but more wind power would the reduce the amount needed.
A lower average rate of gas consumption would also mean that our limited storage would last for longer in the event of any disruption to imports.

You can apply exactly the same logic in a domestic setting. Investing in being "off-grid ready" entails an up-front cost but insulates one from future energy price inflation, as well as increasing resilience in the face of supply interruptions, shortages, etc.