UK traders receive free gas as Norway floods market

The UK energy crisis took an unexpected twist today as it emerged that natural gas was being given away for nothing on the wholesale market.

Some traders were even paying up to 5p a therm to sell their supplies, after the UK market was flooded by fresh imports from Norway.

Gas sold for use today fell into negative territory because of the oversupply through the new Langeled pipeline and warm weather in the UK which dampened demand.

National Grid said it was the first time it had seen traders have to pay to sell gas on a national scale.

But households hoping for lower energy bills as a result were left disappointed when industry experts warned wholesale prices for the middle of winter were still high.

Price reporting agency Platts said that gas for use in January and February was still trading at over 70p a therm – well above the 60p average level of last winter and the 20p average between 2000 and 2003.

And Russell Hamblin-Boone, of the Energy Retail Association, said the surplus in the system was an “anomaly”.

He said demand was low because the warm weather meant many households had not yet switched on their central heating while supply levels were very high because Langeled had been tested at maximum capacity at a time when such flows were not needed.

“Prices for the crucial months of January and February are still three times higher than they were in 2003,” he warned.

“But it is a step in the right direction and is something to be welcomed.

“The pipeline is working. It was designed to supplement the fall in the North Sea gas supplies and the fact that the tests have been successful and we can get gas into the country bodes well for the future.”

Langeled opened on Sunday and delivers gas from the Norwegian North Sea to Easington in East Yorkshire.

It is one of a number of projects aimed at boosting supply to the UK now that it is a net importer of gas due to dwindling stocks in the North Sea.

Last winter restrictions to supplies from Europe sent the cost of wholesale gas to as high as around 250p a therm as demand overtook supply.

National Grid today said current demand for gas was running at less than half peak winter levels because of the mild start to the autumn.

Chris Lock, a spokesman for energy regulator Ofgem, warned: “Once people start to put on their central heating it will increase demand for gas a lot.

“Langeled is good news but there is no room for complacency and when it gets cold we will need that pipeline and other pipelines running at maximum capacity.”

Household energy bills have soared in the last three years because of the spiralling cost of wholesale gas that suppliers such as British Gas and Powergen have to buy to sell to customers.

Billions of euro have been invested in new projects to bring gas to the UK, including Langeled and the BBL pipeline from the Netherlands.