Natural Gas and the UK

Media reports in the UK have been aflutter this week about the spike in natural gas prices, the collapse of small domestic energy supply companies as a result, and a domino effect of other consequences. The most alarm has come from a shortage of carbon dioxide. It turns out that CO2 is essential for food production, so a shortage of it will exacerbate empty spaces on supermarket shelves that have already come about from Brexit and the pandemic.

Then it turns out that much of our industrial CO2 comes from the use of natural gas. A lot of it comes from some fertilizer production factories, which shut down because the economics of making their fertilizer make no sense with gas prices this high.

This morning the news was that the government stepped in to prop up restarting of one of the fertilizer plants for three weeks. All day I’ve been hearing “Three weeks?! That isn’t long enough to get us through this price surge…”

I have no idea whether this is connected, but it seems logical to me that it should be. In about 2013 one of the countries that provides much of the UK’s natural gas supply demanded that the government stop pushing so hard for renewable energy. (Think about who first opened up the North Sea oil fields and you’ll be in the right neighborhood.) At the time there were lots of incentives for homeowners to install solar power systems and so on. If the government didn’t pull back from such things, the tap for that gas supply would be cut off.

The UK has hardly any buffer against such an interruption. We only have a few days worth of capacity to store natural gas.

Soon after that threat, Centrica/British Gas made a pair of deals with Cheniere Energy Partners. For 20 years, Cheniere would supply liquified natural gas at 15% above the Henry Hub price, up to a total that could by itself supply a large proportion of the UK’s needs. (Not much longer after that, the government began scaling back incentives for renewable energy.)

Three weeks strikes me as enough time to send the first of a series of ships to Cheniere’s LNG terminal where Texas and Louisiana meet the Gulf of Mexico, load it, send it across to the UK and unload it.

Somebody please remind the media to look up their articles from 2013.