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Record high prices for natural gas in Northeast Asia have caused a huge decline in LNG imports being delivered to the UK as exporters prefer to send their product to the Asian market to fetch the higher prices. In the first half of 2012 LNG imports to the UK fell by 53% compared to a year before.
Norway has been the biggest beneficiary, supplying record amounts of natural gas to the UK last year. In January 2013 natural gas imports from Norway rose to 138 million cubic metres a day, compared to an average of 76 million cubic metres a day last year.
This dependence on Norway, which provided 48% of the UK’s gas in December 2012, has left the UK incredibly vulnerable to the possibility of high gas prices if Norway experiences any disruption to production.
On the 4th of March a power cut at Norway’s Ormen Lange natural gas field halted natural gas supplies and led to a 64% increase in market prices, sending them to the highest level in seven years.
Craig Lowrey, a consultant at the Utilities Exchange Ltd., said that “the recent price spikes highlight our reliance on Norway in a period when there isn’t the LNG arriving that we got used to.” As said to Bloomberg on the 8th March.
The shortage of LNG being supplied to the UK compounds problems caused by the reducing output from North Sea wells. In 2012 the UK produced just 41 billion cubic metres of gas, down from 86 billion in 2006, and 117 billion in 2000.
By. Charles Kennedy of Oilprice.com
Charles is a writer for Oilprice.com