this article was sent to me by a fellow board member. i assume it was to make the point that u.k. gas supplies are ample. after reading through it though i was left with a few comments and questions so i'll post those along with the news piece.
Gas traders start giving it away
BBC NEWS Tuesday, 3 October 2006, 13:26 GMT 14:26 UK
A glut of natural gas supplies in Britain has seen prices collapse and left traders having to pay for it to be taken off their hands.
on the surface this sentence seems to indicate there is glut but the reasons for this seem to be clearly spelled out below.
Wholesale gas prices for immediate delivery turned negative on Tuesday as supplies surged in from the new Langeled pipeline from Norway.
Britain's gas storage capacity is 96% full so firms need to offload supplies.
ok so we have a new pipline supplying gas at 100%, storage capacity is full and summer demand is also low, no wonder it's time to unload product.
As domestic gas bills are based on longer-term contracts, consumers will have to wait for big reductions.
After trading at an average of 26p a therm through September, the spot price for gas delivered immediately fell to -5p during the course of the day, meaning traders are paying to get rid of it.
so the speculators painted themselves temporarily into a corner. they unload at a small loss but they have over the long term made a killing. cashing out seems the logical thing to do.
Mild weather - and a predicted milder winter - is also reducing demand.
ahh likely one of the most important inputs to the current equation.
"There is simply too much gas flowing into the UK," said Chris Bowden, chief executive of energy services company Utilyx.
Major UK energy companies may be unable to take advantage of the free gas because of the lack of available storage and the fact that they have "hedged" supplies - protecting themselves against the risk of high gas prices over the winter by buying it in advance at a lower price.
in other words, don't get excited about it because consumer prices will remain high until winter demand rises then it's back to business as usual.
"You won't see the effect from this on lower domestic bills until after the winter," Mr Bowden said.
But that will not be soon enough, according to consumer watchdog Energywatch.
"Consumers have paid a huge price over the last three years - we have seen 80% price rises," said chief executive Allan Asher.
"It is time for more competition in this lazy old market - we need some Tesco gas and a price war in the gas market to match the price war in the petrol market."
Prices are expected to rise again this Autumn as colder weather increases demand and the gas flowing through the Langeled pipeline returns to normal levels.
The £5.5bn, 746-mile long (1,200km) pipeline started pumping gas from Norway into the UK's supply network last Sunday, and is currently working at full capacity for testing purposes.
again, mild weather and a new supply temporarily running at 100% have conspired to give the illusion of excess supply.
It has an annual capacity of 20 billion cubic metres of gas and is expected to supply a fifth of the UK's peak winter fuel demand over the next 40 years.
40 years? riiight...
It is hoped the pipeline will ease concerns over dwindling supplies which have sent gas prices in the UK soaring over the past two years.
The UK's own reserves of natural gas are dwindling so it is necessary to import gas from abroad. the most relevant sentance of the article.
how long are u.k. domestic supplies going to last? we know they are dwidling quickly, will this new supply offset this? is it politically stable? is it responsible to bank on foreign energy? what happens if russian gas is divereted elsewhere?