August 21, 2008

Wholesale Gas Prices Soar By 14% in a Day After North Sea Pipeline Leak

By Matt Dickinson

wholesale gas prices rose by more than 14 per cent yesterday after a leak on a North Sea pipeline prompted fears about supplies this winter.

The Norwegian oil and gas producer Statoil Hydro said it discovered the leak on a gas pipeline linking its Kvitebjoern field to an onshore processing plant.

The company closed the pipeline, which pumps an estimated 5 per cent of Norway's total gas output, and warned that it could remain shut until next spring.

Norway is a significant source of gas supplies to Britain, which imports about 40 per of its gas owing to dwindling North Sea stocks.

The announcement sent the forward price of gas for delivery to Britain this winter rising to 104p per therm from 90.75p per therm at the start of the day.

This is above the record highs seen in June this year, when wholesale gas prices passed 1 a therm on the back of rising oil prices, and around double the price this time last year.

David Hunter, an analyst with the energy consultancy McKinnon & Clarke, said the rise was a sign of nervousness of the markets to supply problems. He said: "The impact on the energy market has been significant, as demonstrated by the momentous jump in gas and electricity prices. The amount of gas available to export from Norway to countries, including the UK, will be cut significantly."

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