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London Evening Standard: Wholesale gas being ‘given away’

3 October 2006

Just days after Scottish & Southern Energy became the latest company to raise household gas and electricity bills, a shortterm supply glut has forced producers to dump gas back on the market.

Warm weather has meant demand for gas and electricity to heat homes is extremely low for the time of year. But supply levels are unusually high.

A huge new pipeline – capable of supplying up to 20% of Britain’s gas needs – came on stream from Norway on Sunday. A major shipment of liquefied natural gas docked at Kent’s Isle of Grain the same day.

There was so much gas in the system today that producers – thought to include BG, Shell and others – were having to pay traders to take away the oversupply. This brought about the extraordinary situation where the market value of gas is temporarily minus 4p a therm.

A Scottish & Southern spokesman denied the company is profiting from the low prices. ‘We buy our gas up to a year in advance, so day-to-day changes in the price are not relevant. However, we have said that if there is a sustained drop in wholesale prices we would look at that.’

It is a far cry from the situation last year, when unseasonally cold winter triggered major gas shortages and allegations that French energy companies were holding back supplies to the UK.

However, Centrica, owner of British Gas, pointed out that the price of gas for delivery in the winter months was still high, so household bills are likely to stay up.

‘We’re still looking at about 70p a therm for December, January and February compared with around 60p last year,’ a company spokesman said.

The Norwegian Langeled pipeline – the world’s longest subsea pipeline, built at a cost of nearly £2bn – is the biggest factor in today’s negative price, he added.

‘The Norwegians need to test Langeled properly before the winter, and that means pumping large volumes of gas through it whether we need it or not. It should only last a couple more days.’ and its sister non-profit websites,,,,,, and are owned by John Donovan. There is also a Wikipedia feature.

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