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Chart of the Week


LNG displaces gas interconnector imports

Alex McGregor Consulting Analyst

Since February, the UK’s gas interconnector imports are being displaced in the gas supply mix by a surge in LNG imports. Month-on-month the gas supply mix has changed, with interconnector imports and LNG send-out going from 4.6% and 17.0% of total gas supply in February, to 0.1% and 20.6% respectively in March. LNG price driver The changing tides of our gas supply mix has been the result of 41 LNG tankers arriving to GB terminals in Q119, up from 8 in Q118. LNG is being driven to the UK as the global market is oversupplied amid weak Asian demand for the super cooled fuel, and new LNG projects in the US and Australia flooding the market with additional supply. This weak demand in Asia, has pushed Asian LNG prices to near three-year lows, falling below the price of day-ahead gas in key European gas hubs in the middle of March, and signalling LNG traders to chase better prices in Europe compared to Asia. The impact of this influx of LNG to GB, and the wider European market, has been the key driver in pushing day-ahead NBP gas prices to near two-year lows (31.3p/th) and summer 19 gas to the lowest since 2016 (35.5p/th). Changing gas mix One of the benefits of the LNG market, and GB’s LNG capabilities, is the connection to a global market, allowing us to  take advantage of lower international gas prices rather than being anchored to our neighbours in Europe. So far this year, we have received LNG tankers from Algeria, Egypt, Peru and Trinidad and Tobago. And whilst Russia and Qatar continue to dominate with 12 and 11 LNG tankers in Q119 respectively, the ability to reduce our reliance on any one nation will be very important for the future security of supply in the UK as our import dependency rises from 48% in 2019 to 72% in 2035.  Looking ahead As summer approaches, National Grid are forecasting total UK Gas demand in summer 2019 to be higher than in 2018, 36.1bcm vs 34.2bcm. According to National Grid’s Summer Outlook 2019, this is due to predictions of increasing transit gas flows into Europe as prices continue to drive high volumes of LNG to GB terminals, with 5.3bcm of LNG expected between April-September this year, compared to just 1.4bcm in the same period last year. The GB gas system is expected to be well supplied throughout summer 2019, with LNG helping to meet much ...

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