Britain faces only two days of gas supply left as Middle Eastern imports come to a halt

UK Faces Gas Shortage Amid Dwindling Reserves

The United Kingdom currently has only about two days’ worth of gas reserves, sparking concerns about a looming energy crisis as supplies from the Middle East continue to decline.

According to recent figures from National Gas, the nation’s gas storage has dropped from 18,000 GWh last year to just 6,700 GWh, which would cover less than two days of typical usage.

While a similar volume is kept as liquefied natural gas (LNG), the UK’s reserves pale in comparison to Europe, where countries have accumulated several weeks’ worth of gas supplies.

This limited storage has led to UK gas traders demanding higher prices, forcing the country to pay more than any other European nation for wholesale gas as it competes with international buyers.

Rising Oil Prices and Global Tensions

Goldman Sachs recently cautioned that the current disruption to Middle Eastern oil supplies is far greater than the impact of the 2022 reduction in Russian output following the Ukraine conflict. The bank predicts that oil prices could surpass $100 per barrel in the coming week if no resolution is found, and could even exceed the peaks seen in 2008 and 2022 should the Strait of Hormuz remain restricted throughout March.

Impact on UK Households

Professor Mohamed El-Erian from the University of Pennsylvania has warned that UK families will face increased costs on several fronts due to the ongoing Middle East conflict. Speaking to BBC Radio 4, he noted that the UK is particularly vulnerable to external shocks, which could lead to higher mortgage rates and rising prices for everyday goods and services as supply chains are disrupted.

He emphasized that consumers should expect not only higher energy bills but also increased borrowing costs and noticeable price hikes across a wide range of products.

UK Gas Prices Outpace Europe

Natasha Fielding, head of gas pricing at Argus Media, highlighted that UK gas prices have risen more sharply than almost anywhere else in Europe. She explained that the UK’s main gas hub is now priced above the Dutch TTF benchmark through the end of May, reversing the previous trend where UK prices were lower than those in the EU.

Fielding attributed this to the UK’s minimal gas storage, which leaves it more exposed to sudden price surges. She added, “With limited storage, we’re forced to rely on imports to meet demand.”

Reliance on Imports and Reduced Storage Capacity

Fielding also pointed out that if the UK experiences a cold snap, it will have no option but to outbid other countries for gas supplies. The country now depends heavily on a steady stream of LNG shipments from the US and piped gas from Norway to maintain energy supplies for homes and businesses.

Previously, the UK could store up to 12 days’ worth of gas, but government funding cuts led to the closure of many short-term storage facilities over the past decade. As of Friday, National Gas reported that storage was at just 18% of its former capacity, while LNG tanks were a little over half full.

A spokesperson for National Gas noted that the UK sources most of its gas from Norway and domestic North Sea production, providing flexibility to balance supply and demand.

Concerns Over Declining North Sea Output

However, a recent report to government ministers from National Gas raised alarms about the shrinking storage capacity, especially as North Sea production continues to fall.

Jon Butterworth, CEO of National Gas, warned that ensuring energy security would require building three new storage sites or deploying six large LNG-processing barges to inject gas into the UK’s network. He stressed the importance of gas in maintaining a stable energy system, particularly during cold spells and periods of low renewable output.

Butterworth also cautioned that declining North Sea output and shifts in global energy markets are making the UK increasingly dependent on imports, narrowing the margin for error in the coming years. He noted that geopolitical instability and more frequent extreme weather events are adding new risks to the country’s energy security.

Looking Ahead: Risks and Preparations

Fielding suggested that while price shocks are likely to persist, actual shortages are not expected until next winter, when the UK will again compete with European nations for limited supplies. She explained that the EU will need to import much more LNG than last summer to replenish storage, which is currently at its lowest seasonal level since 2022.

A spokesperson for the Department for Energy Security and Net Zero expressed confidence in the UK’s gas supply, stating that the government is collaborating with industry partners to ensure the system remains robust and secure for the future.