LONDON, United Kingdom (Reuters):
Britain on Tuesday was left with more gas than it knew what to do with as extra supplies pumped through a new pipeline from Norway flooded Europe's biggest market and wholesale prices fell below zero.
Fears of possible winter shortages evaporated as prices fell as low as -4.0 pence a therm, forcing producers to pay for the right to sell gas as the National Grid battled to handle a huge surplus.
Utilities have come under renewed pressure to slash energy bills which have soared in the last three years on dropping production from Britain's ageing North Sea fields.
But consumers are unlikely to benefit from Tuesday's price slide. Utilities are not likely to start passing through lower prices until next year, analysts say.
"I think utilities will wait to see how this winter pans out before putting down bills," said Niall Trimble, head of independent analysts The Energy Contract Company.
"This winter, demand could be between 450 and 500 million cubic metres. I still think we are exposed to possible price spikes," he said.
Triggered by new supplies
Tuesday's price crash was triggered by supplies from the Norwegian Langeled pipeline, which began commercial flows on Sunday. Volumes were swelled by extra gas pumped to help engineers conduct further testing on the pipeline, which runs into a terminal at Easington on England's east coast.
The surge in Norwegian flows came as Britain's storage tanks stood nearly full and demand fell on unseasonally mild weather.
Buyers in mainland Europe showed little appetite for extra gas ahead of the winter.
Energy companies are spending billions of pounds boosting imports to the U.K. to offset a sharp decline in output from Britain's ageing North Sea fields.
In addition to Langeled, a pipeline from the Netherlands is due to be launched in December. Import capacity on the existing U.K.-Belgium pipeline has been increased by more than 40 per cent. Companies are also developing terminals to import liquefied natural gas, shipped on tankers from more distant producers.
