Analysts and British energy companies said on Monday that Britain is in danger of suffering a long-term loss of liquefied natural gas (LNG) supply as top exporter Qatar sends only left-over short-term deliveries to the country while sending most of its LNG to higher paying Asian customers.
Britain is a dependant on Qatar to plug a growing energy supply deficit. London’s efforts to woo Doha deliver a supply guarantee have not been productive so far. Qatari shipments provided a quarter of Britain’s gas needs last year.
Instead, Qatar is trying to lock the majority of its gas into the Asian market through signing long-term supply deals with customers in Japan, South Korea and emerging markets like China and India, where gas demand is rising fast and prices are higher.
The report said that lack of binding supply agreements means that a sudden rise in Asian demand could leave Britain short of much needed LNG imports.
“The UK’s security of supply is not as good as previously thought,” Niall Trimble, director of the Energy Contract Company, said.
The British government is closely monitoring Qatari LNG flows, sources close to the matter said as fears of a sudden LNG supply disruption, especially during the high demand winter heating season, looms over London.
“This is compounded by the fact that we are the only importer on the planet without guaranteed supplies of LNG, so if there is another Fukushima-style event, it’s our supply that would be hit,” Trimble added.
“Preliminary estimates for the first half of 2012 suggest that LNG imports in Europe were down a quarter compared to the same period of 2011, with the UK reduction close to 43 percent,” energy consultants Wood Mackenzie said in a research report.
“European LNG imports peaked in 2011 and will decline through the medium term,” it added.
According to briefing documents prepared for former UK energy minister Charles Hendry and supplied to Reuters by Greenpeace, a three-year, two billion pound ($3.23billion) gas supply deal between British utility Centrica and Qatar was signed in 2011. One of the clauses say that up to a quarter of Britain’s gas may be diverted at Qatar’s behest.
It also shows that Centrica failed to lure the gas-rich Gulf state into an initially proposed 20-year supply agreement worth £30 billion ($48.07bn).
Qatar is producing LNG at full capacity and has set a moratorium on expanding its export terminals. The new long-term supply deals mean that less Qatari gas will be available to be sent to Britain during a time when global gas markets are expected to tighten.