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12 March 2012 | Angeline Albert
Falling domestic production and growing
demand from Asia could mean the UK fails to receive imports of Liquified
Natural Gas (LNG) next winter.
In its weekly Global Research report, Bank of America Merrill Lynch warned European gas buyers are being “squeezed out” of
the LNG market, partly due to demand from Asian countries, including Japan,
which will translate into higher gas prices next winter.
“Indigenous European production is decliningrapidly, raising the need for marginal supply sources such as LNG,”
it said. “With Asian demand surging again, UK and European gas prices will have
to increase to stem the ongoing diversion of LNG cargoes to Asia.”
It argued this marginal source of gas supply
for Europe is contracting. “In fact, it is not implausible that UK LNG imports
fall to zero by the end of 2012, especially if none of Japan's nuclear power plants
are re-started this year,” the report said.
The bank predicted in the UK that winter
2012/13 gas prices will rise towards 90 pence per therm because of reduced LNG
flows and higher oil prices. The current day ahead price is 59.7 pence per
In response, Eddie Proffitt, gas group
chairman at the Major Energy Users' Council (MEUC) – whose
members include local authorities, central government and major retailers –
questioned the banks’ prediction.
“Yes, Japan is buying more LNG. [But] this
is not all that is happening. The Americans are talking about liquefying their
shale gas, which is 16 pence per
therm. This could reduce prices,” he said. “We are not forecasting 90 pence per
therm by next winter. You can buy gas for winter 2012/13 for 73.5 pence per
therm. Most buyers wouldn’t buy now because 73.5 per therm is still expensive.
They will probably purchase a month ahead because it is likely to be cheaper
The MEUC is holding a number of free gas
supply roadshows to discuss the future of gas supplies this year and in the