Gas terminal operator South Hook Gas (SHG) believes that at least two cargoes of liquified natural gas (LNG) were diverted from GB to other destinations in Summer 2022 because technical limits in the gas network led the shippers to believe the gas could not be injected. It said “The market impact of losing these cargos almost certainly leads to increased costs for consumers”.
SHG made the claim as it argued that regulator Ofgem should allow National Grid Gas Transmission (NGGT) to invest more in upgrading a key part of the transmission network.
At issue is a compressor station at Wormington, which is one of a several in NGGT’s network where the ageing gas turbines breach pollutant emissions limits and have to be replaced.
The site has two gas turbines that breach limits and one compressor. NGGT wants to replace both 15MW gas turbines, but Ofgem argues that because of the way the three units are used (mostly the compressor alone or with one turbine) the cost to consumers can be reduced by replacing one turbine and retaining the other. It says that as ‘backup’ the old unit can rely on a derogation that allows it to be used for up to 500 hours where necessary. That would reduce the work’s capital cost by £44 million, the regulator says.
SHG said Ofgem’s decision would reduce resilience at Wormington, “at a time when the importation of LNG is of critical importance to both GB and EU security of supply”. It said there would be more uncertainty around whether Milford Haven could inject supplies into the network – Milford Haven reduced injection at times during 2022 and expects to do so at times during the coming summer – and therefore increase the likelihood of LNG cargoes diverting away from GB. SHG also said that the 500 hours of run time allowed would not in practice be available, for example because the network operator would retain some hours in case of emergency, and it warned that the Milford Haven terminal’s capability is already below its ‘Obligated Baseline’ for significant parts of the year.
For its part NGGT also argued that Milford Haven was fundamental both for GB security of supply – at one time in January 2022 it was supplying 30% of GB demand – and to maintain GB’s position as a gateway to bring LNG into Europe via interconnectors. It said the £40 million cost had to be considered against a gas price impact of £76 million for a five-day shortfall.
NGGT also questioned whether current Future Energy Scenarios, produced annually by NGESO and applied in Ofgem’s decision-making, should allow for more future gas transit to Europe. NGGT said it had “significant reservations in the underlying flow assumptions in FES 2021” because the invasion of Ukraine, with no European imports from Russia, meant flows would not decline as anticipated.