<font size="5"><center>Gas bills may hit new high
after Russia cuts supplies</font size>
<font size="4">U.S. Regrets Russia's Decision</font size></center>
The Times (London)
By Carl Mortished, Jeremy Page in Moscow and Roger Boyes in Berlin
January 1, 2006
BRITISH households could be paying more for their gas after Russia cut supplies to Ukraine, triggering fears of an energy shortage across Europe.
Britain’s Energy Minister gave warning yesterday that the Kremlin’s decision to disconnect its former Soviet bloc ally could hit prices here. In an effort to calm the market, Malcolm Wicks said that there was no immediate threat to supplies. He added that the Government had opened diplomatic channels with both sides in the dispute.
But he cautioned: “It is, however, important that we understand the potential impacts of the negotiation for the European gas market, including the impact on prices.”
The row between the Kremlin and Ukraine centres on a proposed four-fold increase in charges for gas from Russia. A quarter of all EU gas is piped from Russia via Ukraine.
As soon as Ukraine’s supply was cut yesterday morning, Germany’s most powerful energy executive said that the row could create serious supply problems for Germany’s gas consumers. Burkhard Bergmann, head of E.ON Ruhrgas, the German utility group that also owns Powergen, said that he was looking into alternative supplies from Norway and the Netherlands, which would increase prices and put pressure on the British market.
“If the shortfalls are very large and continue for too long and the winter is tough, then we will come up against our limits too,” Herr Bergmann, who also has a seat on the supervisory board of Gazprom, said. There are fears that the row will escalate until elections are held in Ukraine in March.
British households have already suffered from surging utility bills, with gas and electricity prices inflated by last year’s 60 per cent rise in the price of oil. British Gas said last night that further rises were already inevitable because of increases in wholesale prices since September.
Three giant sub-sea Norwegian pipelines deliver a quarter of Germany’s gas consumption direct to the German coast. The Netherlands supplies almost a fifth of German demand while gas from Britain, which typically accounts for 7 per cent of German consumption, can be exported to Germany through the Interconnector pipeline linking Britain and Belgium. Because of heavy winter demand, gas is currently flowing from Belgium to Britain but a surge in demand from Germany could, in theory, encourage continental gas utilities to reverse the Interconnector flow, leading to severe price escalation in Britain.
“Germany can be supplied for more than two months from gas storage tanks in case of an emergency,” Martin Weyand, head of the Federal Association of German Gas and Water Companies, said. Britain is no longer self-sufficient in gas because of the accelerating depletion of North Sea gasfields. During winter months Britain needs to import gas from the Continent. A new pipeline is under construction linking Britain to Norway but will not open until 2007.
Surging energy prices in November forced leading chemical and building materials companies to cut output and, in some cases, cease operations after the cost of gas, which at one stage reached 155p per therm, made production uneconomic.
The United States said it regretted Russia’s decision. “Such an abrupt step creates insecurity in the energy sector,” Sean McCormack, a State Department spokesman, said.
http://www.timesonline.co.uk/article/0,,2-1966720,00.html
after Russia cuts supplies</font size>
<font size="4">U.S. Regrets Russia's Decision</font size></center>
The Times (London)
By Carl Mortished, Jeremy Page in Moscow and Roger Boyes in Berlin
January 1, 2006
BRITISH households could be paying more for their gas after Russia cut supplies to Ukraine, triggering fears of an energy shortage across Europe.
Britain’s Energy Minister gave warning yesterday that the Kremlin’s decision to disconnect its former Soviet bloc ally could hit prices here. In an effort to calm the market, Malcolm Wicks said that there was no immediate threat to supplies. He added that the Government had opened diplomatic channels with both sides in the dispute.
But he cautioned: “It is, however, important that we understand the potential impacts of the negotiation for the European gas market, including the impact on prices.”
The row between the Kremlin and Ukraine centres on a proposed four-fold increase in charges for gas from Russia. A quarter of all EU gas is piped from Russia via Ukraine.
As soon as Ukraine’s supply was cut yesterday morning, Germany’s most powerful energy executive said that the row could create serious supply problems for Germany’s gas consumers. Burkhard Bergmann, head of E.ON Ruhrgas, the German utility group that also owns Powergen, said that he was looking into alternative supplies from Norway and the Netherlands, which would increase prices and put pressure on the British market.
“If the shortfalls are very large and continue for too long and the winter is tough, then we will come up against our limits too,” Herr Bergmann, who also has a seat on the supervisory board of Gazprom, said. There are fears that the row will escalate until elections are held in Ukraine in March.
British households have already suffered from surging utility bills, with gas and electricity prices inflated by last year’s 60 per cent rise in the price of oil. British Gas said last night that further rises were already inevitable because of increases in wholesale prices since September.
Three giant sub-sea Norwegian pipelines deliver a quarter of Germany’s gas consumption direct to the German coast. The Netherlands supplies almost a fifth of German demand while gas from Britain, which typically accounts for 7 per cent of German consumption, can be exported to Germany through the Interconnector pipeline linking Britain and Belgium. Because of heavy winter demand, gas is currently flowing from Belgium to Britain but a surge in demand from Germany could, in theory, encourage continental gas utilities to reverse the Interconnector flow, leading to severe price escalation in Britain.
“Germany can be supplied for more than two months from gas storage tanks in case of an emergency,” Martin Weyand, head of the Federal Association of German Gas and Water Companies, said. Britain is no longer self-sufficient in gas because of the accelerating depletion of North Sea gasfields. During winter months Britain needs to import gas from the Continent. A new pipeline is under construction linking Britain to Norway but will not open until 2007.
Surging energy prices in November forced leading chemical and building materials companies to cut output and, in some cases, cease operations after the cost of gas, which at one stage reached 155p per therm, made production uneconomic.
The United States said it regretted Russia’s decision. “Such an abrupt step creates insecurity in the energy sector,” Sean McCormack, a State Department spokesman, said.
http://www.timesonline.co.uk/article/0,,2-1966720,00.html
