Threat to energy bills ahead as gas costs hit highest level since December
Wholesale costs for natural gas have hit their highest levels across Europe since December last year after key Norwegian export operations were shut down due to a cracked pipe.
The damage, discovered aboard the Sleipner Riser platform, prompted wider energy infrastructure to be halted including the Nyhamna processing plant which exports gas to the UK, pipeline operator Gassco said.
Alfred Hansen, the company’s head of pipeline system operations, told the Reuters news agency: “This has big consequences from a supply perspective.”
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He added that while there were options for bypassing Sleipner, they were time-consuming and not without risk.
There was no estimate on how long the fracture could take to repair.
The shutdowns affect deliveries to the Easington terminal off the Humber estuary – one of six major import and storage facilities in the UK.
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LSEG data showed a 10% leap in the UK contract for July delivery to 90p per therm in the wake of the unplanned shutdown announcement.
That price was last seen at the end of December last year.
It was a similar picture for the main European front-month contract, which also hit a 2024 high as deliveries to countries including Germany also fell.
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Norway became Europe’s biggest gas supplier in 2022 as Russia faced an international backlash for its invasion of Ukraine.
Prices have been volatile in recent weeks due to maintenance schedules in Norway coinciding with attacks on Russian infrastructure.
The immediate leap in prices could have been worse had the outage struck in winter, the period of highest demand.
Prolonged damage to imports, however, would have a bearing on energy costs for households and businesses heading in to winter 2024/25.
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It would not be felt until September at least.
That is because the UK regulator Ofgem announced last month that average annual bills under the energy price cap would fall by more than £100 from July to September.
While that level is locked in, limited increases are already currently expected for the two, colder, three-month periods that will follow.
A Gassco spokesperson said: “We are working… with a plan for repairs and with a plan for compensatory measures to deliver the highest possible volume to Europe.”