Britain could be facing as much as a 6 percent cut to gas supplies this summer due to the closure of three large fields following a leak found beneath Total's (>> TOTAL) Elgin platform, National Grid (>> National Grid plc) said on Tuesday.
Total's Elgin and Franklin fields and Shell's <RDSa.L> neighboring Shearwater site were shut down in late March following the evacuation of the Elgin platform after workers detected a gas leak.
"The impact of the Elgin gas leak is uncertain but may result in displacement of up to 2.3 bcm (billion cubic meters)," the grid operator said in its summer 2012 outlook report.
Gas supply had been forecast to reach 36 bcm this summer, National Grid said, meaning impact from Elgin threatens a 6 percent cut in production.
The loss is likely to be covered by additional output from other offshore fields and higher imports from Norway, the grid operator said, easing concerns of a supply shortage.
LNG ALSO DOWN
Supply of liquefied natural gas (LNG) is also expected to drop this summer as Asian buyers offer higher premiums than Europeans.
Britain has grown increasingly reliant on LNG imports mostly from Qatar but the National Grid expects a sharp fall this summer.
"Forward prices suggest this trend of more LNG deliveries to Far East markets will continue through summer 2012 and beyond," it said, forecasting LNG supply to fall to 9 bcm this summer, down 31 percent from last year.
At the same time, summer demand for gas in Britain is expected to sink 12.5 percent below weather-adjusted levels seen in summer 2011, mainly due to lower use of gas for power generation and weaker storage injections, National Grid said.
Demand for gas to produce electricity is due to drop by 26 percent to 9.3 bcm as high gas prices prompt producers to use cheaper coal to generate electricity.
UK storage injections, which typically happen in the summer when gas is cheaper, are expected to fall to 2 bcm, down by nearly half from last summer.
"The stock level as of April 1 was approximately 2.7 bcm. This is higher than in previous winters reflecting the mild winter of 2011/12," National Grid said, explaining its lower summer injection forecast.
Britain's power market could also feel the impact of severe drought conditions spreading across the UK as power plants may need to curb cooling water usage or use water drawn from rivers, lowering plant efficiency.
Electricity supply margins are expected to be healthy this summer, with demand during peak summer time (June-August) set to fall around 2 percent from last year's levels.
(Editing by James Jukwey and Jason Neely)
By Karolin Schaps