Gas supplies to businesses turned off

Manufacturers in the north-west and midlands have had their gas supplies cut as freezing temperatures propelled demand to a record high.

The cuts came as gas prices spiked on fears of disruption to supplies from Norway, the biggest source of imported gas.

Ninety-five companies on interruptible contracts, which provide gas at a cheaper price in return for an agreement that supplies can be cut off if necessary, were told by suppliers they must go without or face financial penalties.

The National Grid, which operates the gas transmission system, said the gas supply would be restored on Friday for most of the companies as the UK’s critical gas position eases.

”The weather is getting slightly warmer, which does have an effect on demand for heating, so we don’t have to invoke the interruptible contracts to so many businesses,” a National Grid spokeswoman said.

The number of industrial gas burners asked to reduce demand fell to 27 from 95, with 12 in the East Midlands from 55, 15 versus 39 in the northwest, and East Anglia none compared with one on Thursday.

The strain on the network has renewed calls for the government to do more to back the building of storage facilities, to boost security of supply as the UK’s gas output falls. Businesses fear that inadequate storage could damage industry.

The National Grid warned there was a need for increased supply and reduced demand, for the second time this week. A similar alert was last made in March 2006.

It estimated that total gas demand for Thursday would be a record 454m cu m. The previous record of 449m cu m was set in January 2003.

Concerns about supplies were amplified by disruption to the flow of gas from Norway, although the problem, caused by a technical fault at the Troll gas field, was resolved.

Power generators have been shifting from gas to coal, prompted by higher gas prices, and supplies to some large industrial users, such as chemicals companies, have been cut off, to safeguard supplies to households.

Supply interruptions for the 94 industrial users were prompted by local shortages on the distribution networks in the north-west and east midlands, National Grid said.

Roger Salomone of the EEF, the manufacturers’ association, said the loss of supply was particularly hard on companies that were struggling to rebuild their businesses after the recession, and sent a bad signal about the suitability of Britain as a manufacturing location.

“Unless we invest in gas storage facilities to the same levels as other industrialised nations, this could have a very damaging effect on manufacturing companies in the future,” he said.

The problems seem likely to continue into next week: on Thursday the Met Office warned that it expected more snow over the weekend, and that next week was “set to remain cold or very cold across the UK”.

Jeremy Nicholson, of the Energy Intensive Users Group, which represents large industrial customers, said gas supply had been “satisfactory, given the circumstances”.

He pointed out that although the spot price of gas had risen sharply, reaching 56p per therm on Thursday before falling back, it was still well short of the peaks of over £2 per therm reached in 2006.

However, he added, the gas network was vulnerable to further disruption such as a fresh dispute between Russia and Ukraine, and the risk would grow as demand picked up with the recovery in the economy.

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