Energy suppliers held back gas during UK shortage
Terminals near London and in Wales were 40% and 52% full on the day it was claimed the UK had six hours' worth of gas left
Some of Britain's biggest energy suppliers were holding back gas in storage tanks at a time when the market ran into an acute shortage two months ago, triggering a doubling of wholesale prices.
The revelations came after claims the UK was within six hours of running out of gas completely on 22 March and will feed rising public and political anger over soaring power bills and previous allegations of market manipulation.
The National Grid, which keeps data on the gas industry, revealed that the Liquefied Natural Gas terminal at the Isle of Grain near London, used by BP, Centrica and other big suppliers, was 40% full on 22 March. The South Hook LNG plant in south Wales, owned by ExxonMobil and Total, was 52% full on the same day, at a time when various pipeline and other supply problems caused gas prices to hit 150 pence a therm.
National Grid owns and operates the Isle of Grain terminal but leases out the capacity to third-party users, which also include GDF of France and Sonatrach of Algeria. Neither BP nor Centrica were prepared to comment on whether they were holding supplies at the time of the gas squeeze but Andrew Horstead, an analyst with the Utilyx energy consultancy, said explanations were needed.
"The average level of overall LNG stocks across Britain was 30% during March. We need to understand why LNG did not step up and deliver. We need to understand company decisions at the time," he said.
A representative of Britain's biggest energy users, including manufacturers and supermarkets, demanded tougher scrutiny by the energy watchdog, Ofgem, and its City counterpart, the Financial Conduct Authority, to ensure markets worked more efficiently and transparently.
"I would like to see better regulation. I am not sure Ofgem is manned up for the job, while the FCA needs more teeth and more support," said Eddie Proffitt, chairman of the gas group at the major energy users council, whose members include Rolls Royce, Pilkington Glass and Tesco.
The row over supply shortages came after Rob Hastings, energy director at the Crown Estate, which owns the rights to the seabed used for some offshore gas storage, told the Financial Times: "We really only had six hours' worth of gas left in the storage as a buffer. If it had run any lower it would have meant … interruptions to supply."
The price of wholesale gas – needed for homes but also to power electricity generation – has now fallen back to 70p per therm but still remains unseasonally high and compares with 57p a year ago and 28p in May 2009.
Suppliers such as Centrica and SSE have warned that domestic and business bills may have to rise again, while the Department of Energy and Climate Change said on Fridayit was ready to make a market intervention to increase gas security if necessary.
The revelation also comes as the industry faces allegations of manipulation in both oil and gas markets, triggering dawn raids by the European commission and reviews by Ofgem and the FCA.
Proffitt is frustrated that the two regulators are still working on a preliminary review into whistleblowing allegations first raised by the Guardian in November last year. He compares the UK performance negatively with the US, where both BP and Barclays bank are among the companies to have been hit by hundred million dollar fines in recent years after claims of market abuse.
"Why is it taking [Ofgem and the FCA] so long and what is happening in the meantime? I have no evidence that it [the market] is being manipulated but the bulk of trades are done over-the-counter – or under the counter as many people would have it – and so there is no real proof of what is going on."
Ofgem said it was aware that everyone wanted a quick result from the investigation into gas market regulation raised by a whistleblower from the price reporting agency, ICIS-Heren, but the most important thing was to do it properly.
A BP spokesman said the company only has 10% of the capacity at the Isle of Grain terminal but in general believed a variety of sources, including pipelines and the LNG, enabled the market to "respond quickly and appropriately to price signals".