Gas supplies from Norway to the UK could be cut off this weekend if a dispute over pay for oil and gas workers escalates, a pipeline operator has warned.
Europe’s gas crisis intensified after one of Norway’s biggest operators was forced to shut down three oil and gas fields after workers went on strike.
UK gas prices hit three-month highs on Tuesday as energy company Equinor said fields on Norway’s continental shelf, which produce the equivalent of 89,000 barrels of oil a day, would shut down production.
Norway’s oil workers’ union Lederne said the strike would cover three more sites, affecting 333,000 oil equivalent barrels per day, including 264,000 natural gas.
If the strike escalates, it could affect more than 1 billion barrels equivalent per day, or nearly 60 percent of Norway’s exports since Saturday.
Gassco, Norway’s state-owned pipeline operator, told the Financial Times that “in a worst-case scenario, supplies to the UK could stop completely”.
He said industrial action could force the closure of Sleipner, the pipeline’s distribution hub to Easington on the north-east coast. The hub is located on the Langeled Pipeline, which was originally known as ‘Britpipe’ and is among the longest underwater pipelines in the world, connecting Easington to the Nyhamna terminal in Norway.
The Easington terminal handled 70% of UK imports from Norway between January and April this year and is responsible for 67% of Norwegian imports in 2021.
But Josef Pospisil, head of utilities at Fitch Ratings, downplayed the risk to consumers of the potential shutdown. He said: “We do not expect a significant impact from a short-term supply reduction from Norway on gas availability in the UK, as the latter has been receiving record volumes of LNG cargoes recently.”
Workers are demanding higher wages to cope with rising inflation, which has been fueled in part by a surge in oil and gas prices since Russia’s invasion of Ukraine.
Britain’s day-ahead gas price hit a three-month high of 272.5pa therm on Tuesday, up 17.9%. Gas prices for delivery next month rose 7% to 302p per thermal.
The Norwegian strikes have exacerbated the supply squeeze following a cut in gas supplies to the EU from Russia.
European nations are scrambling to fill their gas storages before winter for fear that Russia will cut off supplies altogether.
Germany has drafted laws that allow the government to take stakes in companies hit by rising gas prices. Uniper, which owns gas plants in Germany and the UK, is in talks with the German government over a rescue plan.
In the UK, Business Secretary Kwasi Kwarteng is working with business to strengthen Britain’s energy supply ahead of winter. Britain gets about a third of its gas from Norway, with the rest from a combination of the North Sea, Europe and LNG imports from the rest of the world, including the US.
Rising commodity prices since the start of the war in Ukraine have also hurt the British market.
Amid protests against high fuel prices, the RAC said the average price of a liter of petrol rose by 16.59p in June, breaking the previous record of 11p set in March. The price of a liter of petrol rose from 174.84p to 191.43p and diesel rose by 15.62p in June, ending the month at 199.05p.
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Retailers have been accused of profiteering and this week the Competition and Markets Authority is due to report to the government following an investigation into the market.
The RAC’s fuel spokesman, Simon Williams, said: “The speed at which pump prices have risen over the past four weeks is hard to fathom. Not a day went by in June that gasoline prices didn’t rise, even as the price retailers pay to buy fuel fell.
“There is no doubt that motorists are getting incredibly harsh deals at the pumps at a time when the cost of living crisis is being felt more acutely.”
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