UK to rely on LNG deliveries doubling if faced with gas supply cut, says National Grid

The UK will rely on deliveries of liquefied natural gas (LNG) this winter more than doubling from usual levels too meet demand in the event of Russian gas supply cuts to Europe, National Grid said.

In its winter outlook report the grid operator said the UK’s gas supply is “well in excess” of normal demand conditions, but if Russian deliveries to Europe were to be constrained by tensions with neighboring Ukraine increased LNG would be needed.

The results of the stress testing show that under average winter conditions, UK gas demand under both low and high levels of disruption can be met as normal, with much of the replacement gas coming from LNG imports.

LNG imports would need to more than double from 50 million cubic meters per day to 120 mcm/day if Russian gas was forced to flow at lower levels through alternative routes due to political tensions with key gas-transit state Ukraine, the report said.

Securing LNG cargoes on the global market during peak winter demand periods would cause a strong increase in wholesale market costs as the UK would need to offer a price at a premium to Asian or South American markets to divert shipments from those regions.

“Only for the most extreme scenario with cold winter conditions and full disruption of gas from Russia would trigger a need for further market actions; for example, reduced exports to the continent, maximised LNG imports, and/or demand-side reduction,” National Grid said.

Summer gas prices resisted heavily bearish fundamentals on the UK gas market, rising with concern over escalating tensions in the Russia-Ukraine area. However, in late September prices reversed some of these gains on news that the two countries agreed a gas supply deal covering the next six months.