Gas prices spike following break to supplies

a shortage is just weeks away.

Natural gas prices spiked to over £1.50 a thermin London yesterday after technical problems with one pipeline disrupted supplies to Britain from Belgium.

They later fell back to about 90 pence a therm, far above the mid-50s range in which gas prices would normally trade at this time of year.

Industry sources warned that the incident illustrates Ireland 's and Britain's vulnerability to supply shocks in the natural gas market. Prices in Britain have been unusually high for the last four weeks as the cold weather drives demand.

Knock-on effect
The problem is having a knock-on effect in Ireland, which relies on Britain for the supplies of natural gas to generate much of its electricity, and drive many larger industries.

Many big energy users, which include power plants, dairy and food processors, and pharmaceutical manufacturers, buy gas on a short-term or “day-ahead” basis.

Since the beginning of the month, they have been paying about 50 per cent more than they would at this time of year, when demand usually slows.

John Heffernan, of Bord Gáis Energy Index, confirmed yesterday that prices are high due to demand and the absence of sources of supply. However, he said consumers are sheltered from any immediate impact as supplies for householders are bought months ahead and at rates far cheaper than short-term markets.

Mr Heffernan pointed out that sterling’s weakness against the euro is helping to cushion businesses against the worst impact of the high prices.

The British gas market has been unusually volatile. According to industry sources, yesterday’s spike was one of three or four over the last month. Stocks are low in Britain, which was yesterday reported to have just two days’ worth of natural gas in storage.

Inventories at Rough, its largest natural gas storage facility, were reported to be an all-time low yesterday. As a result, it is importing fuel from the continent and its North Sea fields.

Diverted supply
The problem has been compounded because supplies of liquid natural gas, normally shipped to Britain or western Europe, are being diverted from the Middle East to China and India. Some also suggest that if the cold weather were to continue for a further four to six weeks, it could lead to a natural gas shortage.

The Republic uses about 20 million cubic metres of natural gas a day, compared to 340 in the UK. The State imports over 90 per cent of its natural gas needs, much from Britain, and the fuel is used to generate 60 per cent of its electricity needs.