SIBERIAN LNG FOR BRITAIN
FT - The UK's cold snap this week may have blown in from Siberia, but now Russia's far north is set to provide some relief to Britain: a cargo of liquefied natural gas to replenish the country's stretched energy supplies.
However, the LNG cargo coming from Russia's Yamal energy project in Siberia will not arrive in the UK without controversy, partly because it will highlight the fragile state of British energy security amid declining gas production.
UK gas prices have soared this week as the extreme weather dubbed the "Beast from the East" generated huge demand for energy. Wholesale "same-day" prices more than quadrupled at one point to reach their highest level in at least 12 years.
National Grid, which operates the UK's gas transmission system, said on Thursday that it was facing a supply deficit as demand soared — the first such warning for eight years.
The shortage warning was withdrawn on Friday after some companies were paid to reduce their consumption of gas, but National Grid said demand remained high and it was "continuing to monitor developments closely".
The Yamal energy project was the target of US sanctions during development owing to Russia's involvement in the Ukraine crisis, and its start-up late last year was hailed as a victory for president Vladimir Putin, who personally oversaw the commencement of operations.
While Russian LNG shipments are not subject to sanctions, the British government has taken a tough line on Moscow in recent months, with Theresa May accusing the Kremlin of attempting to "weaponise information" to undermine the west, among other things.
The LNG cargo is being brought to the UK by Royal Dutch Shell, according to two people familiar with the shipment. Shell is expected to collect the cargo this weekend from a Russian LNG icebreaker with its own chartered vessel, executing a ship-to-ship transfer of the super-cooled fuel off the coast of western France.
Shell is then due to deliver the cargo on March 6 to an LNG terminal at Milford Haven, which will regasify the shipment and pump it into the UK network. Shell and Novatek, the Yamal operator, both declined to comment.
This week's cold snap has highlighted Britain's growing dependence on imported gas as domestic North Sea reserves decline. Gas is critical to UK energy security as the source of 40 per cent of electricity generation and heating in most homes and businesses.
Critics accuse the government of increasing market vulnerability by authorising the closure of the UK's largest gas storage facility in the North Sea. The site, known as Rough, was able to hold a tenth of daily peak gas demand until it was closed last year by Centrica, owner of British Gas.
"The market is facing a strong test of how well it can operate without being able to rely on Rough for additional storage volumes," said Oliver Burdett, commercial director of EnAppSys, an energy market analysis company.
The government has argued that plentiful piped gas from Norway and continental Europe — coupled with LNG shipped from further afield — are adequate to keep supplies flowing in any conditions.
The Department for Business, Energy and Industrial Strategy said on Friday that less than 1 per cent of UK supplies come from Russia, adding: "Great Britain benefits from highly diverse and flexible sources of gas supply."
But critics note that this import dependency exposes consumers to price spikes when supplies are tight because the UK is forced to compete with the rest of Europe for piped gas and with the rest of the world — especially large Asian economies — for LNG.
Yamal's first ever LNG shipment was meant to come to the UK in late December after a shutdown of the Forties pipeline system delivering oil and gas from the North Sea caused prices to jump.
But by the time it was delivered to the Isle of Grain in Kent UK gas prices had eased, leading traders to reload it on to another vessel that eventually sailed to Boston in the US.
Meanwhile, as the UK remained in the grip of low temperatures on Friday, the country's energy regulator, Ofgem, was among organisations facing disruption. The heating at its London headquarters failed on Friday morning because of frozen pipes, causing some chilly employees to go home. A spokesman said the problem was later fixed.
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BLOOMBERG - While Europe as a whole gets more than a third of its gas from Russia, that share is lower in the U.K., which receives the bulk of its fuel from North Sea fields and Norway. Still, Moscow-based Gazprom PJSC was the second-biggest supplier to major industrial consumers in the U.K. last year, according to Britain’s energy regulator Ofgem.
FT - of the six LNG tankers that have made deliveries into the UK so far in 2018 three have carried cargoes originally from Russia, leading to questions about whether Moscow was gaining a foothold in the UK gas market after starting up the Yamal LNG facility in Siberia late last year.
REUTERS - So far this year, two Yamal cargoes unloaded at British terminals for domestic consumption, accounting for about a third of Britain’s 2018 LNG imports after typical supplier Qatar pre-sold the bulk of its winter output to Asia last year.
REUTERS - U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $60.77 a barrel at 0753 GMT, up 6 cents, or 0.1 percent, from their previous settlement. Brent crude futures LCOc1 were at $64.62 per barrel, down just 2 cents from their last close.