Gas pipeline break could cause industrial shutdowns and gas price shocks – but should consumers pay for a replacement? Ofgem asks for views

What’s the biggest risk to the UK’s gas supply? Arguments abound: over whether exposure to the diversity of a global LNG market is more resilient than when we relied on our own continental shelf; over how Brexit will affect imports from our major European suppliers; and whether consumers should underwrite more domestic gas storage.

But debate over how to deal with a major pipeline in the Humber estuary reveal that the biggest risk may be our own ageing pipe network.

A break in that single pipeline would “result in a supply shock of a magnitude that has not been seen to date in the UK,” says National Grid. It would cause major industrial shutdowns in the Northeast and gas price shocks across the country. But arguments over whether to build a replacement are more complex.

Ofgem is minded to reject a request from National Grid Gas Transmission (NGGT) for customers to fund replacement the pipeline across the Humber (known as ‘Feeder 9’) which is key to transporting gas from the Easington terminal. NGGT says the trenched pipe, installed in 1984 with a planned 60-year life, has been uncovered, so it is aging faster than expected  and is also exposed to other risks like impacts from shipping.  Replacing it will cost £100-150 million.

What happens if the pipe fails? The effects would be dramatic, especially in winter. It would cut the NGGT’s ability to move gas out of the Easington terminal and around the east coast’s major industrial users to a quarter of current levels.

Now – and until at least 2025 – that capability has been fully contracted to supply industrial and power users. An interruption would likely mean shutting off gas supplies to industry in the area. Gas prices would spike for all users and see a long-term increase. It could also cause long-term damage to GB’s relationship with Norway, which supplies gas to the UK via Easington.

Even outside the key winter period the loss of Feed 9 would badly strain the ageing GB compressor fleet, as NGGT would have to source gas from other terminals and reroute it through the network. That fleet is already under severe pressure as the gas network operator responds to much more volatile gas use.

That is a major risk to UK PLC. But how real is it?

Ofgem points out that interim measures currently protect the pipe. And although they are regarded as a 5-10 year stop-gap by NGGT, they are commonly used for much longer periods in the oil and gas industry. What is more, after 2025 the situation may change and Feeder 9 may become less important, as gas supplies and users change. The regulator says that means a decision to replace the pipe can and should be delayed, or customers could find themselves paying for a £100 million project that was not required.

NGGT has already done substantial work on the project. But the regulator also took aim at NGGT’s decision-making process. The network owner had not done a full cost benefit analysis, or taken enough account of the mitigation measures, or consulted with HSE, it said.

NGGT took a decision to proceed with the pipe in 2016 in advance of being granted a development consent order for the project. But the regulator said even the DCO need not be a signal to go ahead, when a ‘wait and see’ option was available and might be better value for consumers.

Ofgem thinks the replacement for Feeder 9 should not be funded – yet – although it admits it did not take into account some of the risks of pipe failure in coming to that conclusion.  It is consulting before making that decision final and wants views by 29 August.

What’s your view?

See the full consultation here

Further reading

Fast-cycling electricity generation ‘a major challenge to gas network operability’

Capacity Market shift towards a localised energy industry raises gas network questions

Scenarios show gas network pressures below statutory minimum by mid-2020s

 

1 comment for “Gas pipeline break could cause industrial shutdowns and gas price shocks – but should consumers pay for a replacement? Ofgem asks for views

  1. Alan Beech
    August 12, 2018 at 7:19 AM

    Has any consideration been made on UK hauliers that are considering investing in their fleets to be fully CNG powered? Compressed Natural Gas.

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