News that Britain’s largest natural gas storage site Rough could be out of action for the coming winter sent shock waves through the NBP market. The announcement has ramifications not just in Britain, but throughout northwest Europe due to the influence of the NBP.
So how much does Britain actually rely on Rough to supply the markets? In the last gas winter, covering the period from 1 October 2015 to 31 March 2016, withdrawals from Rough totalled 2.7 billion cubic metres (bcm).
To put this into context, the country used just over 49bcm during those months, meaning Rough accounted for about 6% of consumption.
Looking at it this way, the news doesn’t seem too important, but looking at the highest-demand periods tells a different story.
During January and February this year, normally the coldest and highest-consumption months for Britain, Rough was delivering 30 million cubic metres (mcm) per day on average, almost 10% of total supply.
It should also be noted that the winter just gone wasn’t particularly cold and that in other years the facility becomes even more vital.
For example, consumption in January/February 2013 was about 8% higher than the same months this year. At that time Rough withdrawals accounted for about 12% of supply, with more than 2bcm withdrawn in those months alone.
This means that if a cold snap hits, things could become pretty tight, but the good news is there is a lot of spare capacity elsewhere.
The Interconnector is the first place to start. This bi-directional link with Belgium is capable of delivering about 57mcm/day in either direction.
Last winter, Britain exported more on average than it imported, which is in itself unusual, and not by a small margin either.
During the six-month period Britain sent a net 2.7bcm to mainland Europe. This means that if demand is similar this winter, simply shutting off Interconnector flows could mitigate the impact of the Rough outage.
In a cold winter scenario, NBP prices would rise to a level that would incentivise substantial imports through the pipeline, potentially meeting any shortfall.
Norway and the Netherlands are the other pipeline candidates. Links to both countries have been relatively underutilised in recent years, so either could ramp up to meet any shortfall caused by Rough, particularly Norway.
The final supply pillar is LNG. Again, Britain’s LNG import infrastructure has a lot of spare capacity and has done ever since Japan increased its demand for cargoes in the wake of Fukushima.
At the same time LNG export capacity is increasing, while the appetite for energy in east Asia appears to be waning.
Of course, there is no way of knowing what will happen this winter, with freezing weather sweeping over Europe in October always a possibility, as is a major disruption to supply.
All things considered though, Britain should be ok. Wholesale prices may rise, but whoever wants gas will probably get it.