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UK set up for global gas fight

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LNG Industry,

Bloomberg are reporting that the UK gas market must now operate without its biggest stabilising force: the giant Rough gas storage facility under the North Sea.

The planned permanent shutdown of the Centrica Plc site, able to meet 10% of peak demand in winter, means Britain is becoming even more reliant on imports of LNG or pipeline fuel from Russia and Norway. That sets up the possibility that traders would have to outbid Japan, the world’s biggest LNG buyer, and others to keep millions of homes warm.

Political uncertainty is making the supply game even riskier, with rules for international gas pipelines clouded in mystery as the UK negotiates an exit from the EU. The diplomatic crisis this month involving Qatar caused gas prices in Britain to jump the most since January as two tankers were diverted.

Last winter as much as 94% of the country’s gas came from sources other than storage. More than half of that was imports, mainly through pipelines from Norway. Statoil ASA, Norway’s state-owned producer, has repeatedly said it does not plan to significantly boost exports, but can divert more fuel to Britain if needed.

The UK’s LNG imports may increase by 39% next year as new plants will come online.

Predictions of a wave of LNG coming to Europe have previously proven to be premature. Supply was expected to build up last year but demand in Asia, the Middle East and Latin America raised prices in those areas and diverted cargoes.

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