ADDENDUM 4
WINTER SCENARIOS
The WOR gives the following capacities of the
various supply sources feeding the UK market. We have added our
view or the sources.
| Supply (mcm/day)
| Winter Outlook MaximumBase Case
| INEOS view Max Capacity60 DayCapacity
|
| Beach | | 327
| 303 | 320-330 | 300-310
|
| Isle of Grain | | 17
| 13 | 17 | 13 |
| IC Imports | | 48
| 42 | 48 | 42 |
| Total Supply | Excluding Storage
| 392 | 358 | 390
| 360 |
| Storage | LRS (Rough) |
| | 42 | 42 |
| MRS (Hornsea etc) |
| | 29 | 13 |
| SRS (LNG) |
| | 49 | 3 |
| Total Storage | | 120
| 119 | 120 | 58
|
| Total Supply | Including Storage
| 512 | 477 | 510
| 418 |
| | |
| | |
We agree with the capacity that is available from the various
sources on an instantaneous basis. This is a major step forward
from previous WORs that have tended to overstate the beach capability.
We do however have two significant issues with the "Base
Case" numbers used in winter outlook. The first relates to
the storage numbers that are assumed. While the instantaneous
delivery may be 120 mcm/day there is not much physical capacity
in the medium and short-range storage systems. When taken over
60 days the "deliverability" of storage is only half
the instantaneous capacity. This brings the maximum sustainable
capacity to around 420 mcm/day, assuming almost full imports through
the interconnector.
Our second issue relates to the assumptions around the interconnector.
It should be recognised that the interconnector exports as well
as imports. If demand for gas is high on the continent it is unlikely
that gas will be made available to supply the UK market and indeed
the UK could be seen as a source of gas. If the interconnector
has no flow the maximum sustained delivery is around 375 mcm/day.
If the interconnector is exporting at 75% of capacity the maximum
gas available to the UK falls to around 340 mcm/day.
It is worth noting that the supply capacity available to
the UK for this winter is greater than the capacity that was available
last winter.
| 60 day capacity (mcm/d) |
| 2004-05 | 2005-06
| Change |
| Beach | | 320
| 303 | -17 |
| Isle of Grain | | 0
| 13 | +13 |
| IC Imports | | 25
| 42 | +17 |
| Total Supply | Excluding Storage
| 345 | 358 | +13
|
| Storage | | 55
| 58 | +3 |
| Total Supply | Including Storage
| 400 | 416 | +16
|
| | |
| |
Clearly if capacity were the key issue, this winter should
be seen by the market as better than last winter. The issue that
the market is concerned about is whether there will be gas available
to fill the capacity when it is required. We believe the sustainable
deliverability available to the UK market during cold weather
will be around 420 mcm/day if the new import systems are utilised
but this could fall to as little as 340 mcm/day if the interconnector
exports gas.
On the demand side we would agree with the analysis in the
WOR that gives demand between 400 and 520 mcm/day for the top
60 days of a cold winter. The 60 day demand rate seems to be around
450 mcm/day for a "1 in 10" winter and around 400 mcm/day
for an average winter.
The following table shows the supply/demand balance for average
and cold winter conditions with various interconnector flows.
| Supply/demand balance (mcm/day)
| Winter Scenarios Import
Zero import
|
| Export | |
| | |
| Interconnector flow | mcm/day
| 42 | 0 | -35
|
| 60 day supply capacity | mcm/day
| 420 | 375 | 340
|
| UK 60 day supply/demand balance |
| | |
| "1 in 10" cold winter | 450 mcm/d
| -30 | -75 | -110
|
| Average winter | 400 mcm/d |
+20 | -25 | -60
|
| | |
| |
In our view the UK can survive average winter conditions
if the interconnector imports at reasonable rates and this is
probably a safe assumption for an average winter. However in a
cold winter it is less likely that gas will be available to import
through the interconnector and more likely that the UK will be
short of gas. The gas shortfall will depend on the interconnector
flows but is very likely to lead to wide scale demand side destruction.
| 
