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UK Exports its own Cheap Gas, whilst Importing Expensive Foreign Gas

An analysis of gas flow in and out of the UK, performed jointly by the Guardian and Greenpeace, has shown that Britain more often than not exports its cheap gas to Europe, whilst at the same importing more expensive gas from Qatar to be used domestically.

Ofgem, the energy watchdog, has suggested that this behaviour could undermine the UK’s energy security.

The focus of the study was the gas interconnector between the UK and Belgium, where more than 40% of the time between December 2011 and October 2012, the gas was flowing the ‘wrong way’. Over 15 times more gas was exported to the continent than imported, despite that demand and wholesale prices were higher in the UK.

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Leila Dean, from Greenpeace, stated that “the gas market has once again been revealed as a dark and murky world George Osborne's dash for gas won't lower bills – it'll leave consumers even more open to exploitation.”

The cause of this ‘flow against price difference’ (FAPD) is unknown, but the concept has been around since 2004 when the UK switched from a net gas exporter to a net gas importer. The North Sea natural gas production decreased, and in order to increase the energy security and make foreign supplies more readily available, pipelines were opened to Norway and the Netherlands, and new LNG terminals were constructed. The whole natural gas market around the UK became very complex, far quicker than regulations could be written to control the sector and keep some semblance of transparency.

By. Joao Peixe of Oilprice.com



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