Explosion at one of Europe’s main hubs roils markets
Britain already coping with cold snap, cracked North Sea pipe
U.K. natural gas prices jumped the most in more than eight years after an explosion at one of Europe’s biggest supply hubs threatened to curb flows during a cold snap.
The market already was struggling to absorb the impact of a crack that shut down a North Sea pipeline network when a blast at the Baumgarten hub in Austria killed at least one person and injured 18. The facility 50 kilometers (31 miles) northeast of Vienna transports the equivalent of about a 10th of European gas demand.
Front-month gas in Britain jumped as much as 23 percent to almost 74 pence a therm ($9.82 a million British thermal units) on ICE Futures Europe, the highest since December 2013. Gas flows into the U.K. surged to a four-year high overnight as shippers responded to higher prices. Liquefied natural gas tankers may be able to fill some of the gap, but those vessels take days or even weeks to arrive, said Massimo Di-Odoardo, principal analyst of gas & LNG at Wood Mackenzie Ltd.
“Gas demand is at above average levels because of the cold snap,” he said by email, estimating the shortfall of supply from the Forties outage at about 10 percent of average winter demand. “If outages persist, prices will remain high for some time.”
Supplies from the Netherlands, Belgium and storage sites increased after a worsening hairline crack halted North Sea production from fields that use the Forties pipeline network. That boosted prices on Monday.
Compounding supply problems, the Norwegian network manager said Tuesday flows would be trimmed from Troll, Europe’s largest offshore gas field. Norway is the U.K.’s biggest foreign supplier. Supply from Belgium and the Netherlands also dipped from near-record levels after the explosion in Austria.
Baumgarten is Austria’s largest gas reception point and main distribution hub for imports from countries including Russia, Europe’s biggest gas supplier. Moscow-based Gazprom PJSC said it “is working on redistribution of gas flows and does its best to secure uninterrupted gas supplies to the clients on this transport direction.”
The U.K. is more vulnerable than normal this winter because Centrica Plc is closing the nation’s biggest storage site after more than 30 years. Rough was able to meet as much as 10 percent of peak winter demand but that is now much reduced as it pumps out its last remaining fuel.
It takes about two weeks to bring LNG from Qatar, the U.K.’s biggest supplier of the super-chilled fuel. Only one tanker, the Bu Samra, is confirmed as arriving in the U.K. this month. The first tanker from Russia’s Arctic plant Yamal LNG may also head to Britain and would arrive in about five days, according to shipping website sea-distances.
— With assistance by Matthias Wabl, and Jonathan Tirone