The Prime Minister is soon to announce a major gas deal between the UK and US in an energy security partnership.
Due to the Russian war, the UK has faced many issues due to the security of the EU’s energy volatility. Supplies have been low in Europe which has had a knock-on effect on the UK. In extreme circumstances, the UK could now be facing blackouts.
However, with a new US gas deal, the UK hopes to secure around 10bn cubic meters of gas. The time frame of imports beginning is still unclear. It is uncertain which suppliers the deal will be with. British Gas has already signed a deal with Norway’s Equinor for 3 years, beginning next June.
Do we already get gas from the US?
Yes, the US has been providing LNG (Liquified Natural Gas) for the UK for many years. Before the Russian invasion of Ukraine, the UK imported 3.9bcm of LNG from the US in 2021. This made up around 26% of the UK’s total imports.
Recently over the past 12 months, the UK has imported 9.7bcm of US LNG, this has accounted for around 42% of all LNG imports.
Will a new US gas deal benefit the UK?
Even with the UK’s strength in importing LNG, we do not have enough storage capacity in the country, Centrica is opening a new site, but this is still not enough to meet demand.
Therefore, we need a steady flow of LNG being imported to meet demands. The UK is hoping with new LNG deals and deals signed to keep coal-fired power stations open that the UK’s energy security can be improved.
Will this deal improve UK gas prices?
gas prices have fallen over recent months, mainly due to it being a mild winter so far and Europe managing to meet storage capacity.
With more gas being imported from the US the gas situation could become more secure in the UK, depending on the EU’s situation next year. The EU could use a lot more of their storage than planned this winter, this will lead them to struggle come next year, especially if Russia further reduce exports to the country.
This situation is likely, which means gas prices are going to go up anyway next year. Having this deal will only really ensure the UK has sufficient supplies.
What about energy security?
The UK has been pushing a lot more for energy to produce in the UK. For example, there has been the reopening of the North Sea gas reserves and oil rigs. There have also been plans to begin fracking as well. This will increase the amount of gas and oil the UK produces so we can rely on our own supply instead of imports.
However, the UK still has some issues with storage infrastructure, and it will take a while for the UK to start producing enough supplies to inject into the energy systems.
This means for now the UK still must rely on deals with reliable countries such as the US to ensure we keep a steady flow of gas in the UK and minimise shortages of supplies that could lead to winter blackouts.
What should my business do?
From the way the current gas market is looking it would be best to get your next energy contract signed sooner rather than later.
As we have mentioned above whilst the UK might be in a secure position for gas next year, prices are likely to go up. This would mean waiting to sign could lead you to pay a lot more on your energy contract than signing now would.
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