The Covid-19 pandemic is pushing the UK gas market into deadlock this summer, as the country struggles with limited storage capacity, lower demand and resilient production.
Wood Mackenzie’s senior analyst Hadrien Collineau estimated earlier this week that there will be only 600 million cubic meters (Mmcm) of storage space for injections this summer. “There’s a risk that storage could be fully by early June,” he warned.
Since the country’s largest and only long-range storage facility, Rough, was shut in June 2017, the UK has struggled to absorb excess volumes through the summer months and prepare for the winter season.
As the summer season approaches, storage is already “very limited” with inventories more than 60% full, Collineau said. On top of that, the UK is dealing with growing domestic output, limited scope for exports and weak gas demand.
“The industry and power sectors account for most of the UK’s summer gas demand. And both of those sectors have been hit hard by the lockdown,” said Collineau. “Although restrictions will start to ease, it will be a slow process. Gas demand will take time to recover.”
Wood Mackenzie estimates demand will be 18% lower than its five-year average this month, testing a floor of just 3 billion cubic meters (Bcm) per month in the summer, Kallanish Energy reports.
“LNG exporters desperately looking for market are fast approaching another brick wall,” the consultancy firm said, pointing that the UK’s effective regasification capacity will be capped at 2 Bcm/month through the summer
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