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UK operator says LNG facilities no longer economical

27 Aug 2010 17:28:31 | esgm

National Grid said this week that it is no longer economical to keep its LNG facilities running in the current gas market, outlining Partington in particular.

The admission comes in the same week that British regulator Ofgem announced it would be reviewing the way price controls for the LNG facilities owned by the UK operator are implemented (See ESGM 23 August 2010).

National Grid said that of the three remaining LNG facilities left after Dynevor Arms was closed last year (Avonmouth, Glenmavis and Partington), Partington was the most likely to face closure while the others will be reviewed.

"We're saying this because the money we're getting from selling [the facilities] as a commercial service has gone. The question is how can we keep them open - which is why [Ofgem] are opening the review," a press spokesman at National Grid explained.

"What we have found is that the market is not willing to invest in LNG storage (...) This means, economically, what we have been getting isn't enough to keep it going".

The three facilities have decreased in strategic importance with the growth of LNG terminals in the UK, as well as new storage projects coming online, National Grid said

"The situation has changed at Partington, that's because the system has changed around it. There is new storage and a TransPennine pipeline. This is no longer an isolated area," the operator said.

A source from an end users group disagreed that the facilities should be closed, arguing there was still a need to keep the terminals open.

"It is unclear what the outcome of the review will be, or what it's about (..) but if there is a suggestion that [LNG storage facilities] are not there and they are not used it doesn't sound like a good outlook," the source said.

The source pointed to the fact that the facilities were used heavily to satisfy demand at the beginning of January this year when the system collapsed as temperatures plummeted and Norwegian supply dried up.

The four LNG facilities were built to satisfy peak demand in isolated areas, where the National Transmission System ran short. Dynevor Arms originally satisfied South Wales, where prior to the building of two LNG terminals and the surrounding infrastructure in the last two years, there was no grid.

In sharp contrast to newer mid-range storage sites such as Aldbrough, which takes 20 days to fill and 10 to empty (and holds four times more gas than Partington), Partington takes weeks to fill to capacity, yet just five days to empty. "It takes all summer to fill up. They empty very quickly but take a long time to refill. They used to provide a valuable service, but there's other services doing that now" National Grid said. SL

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