Britain’s National Grid buys gas into September amid system tightness, plant margins squeezed

National Grid’s recent record of buying natural gas to balance the British system looks set to continue in September as shippers continue to leave the network undersupplied, according to data from the operator.

While the volumes are minimal in the context of total British supply and demand, the buying is indicative of the undersupply that has pushed key contracts on the NBP to prices not seen since February.

This has significantly weighed on profit margins for UK gas-fired power plants. Combined with an increase in the EU carbon price, margins for October delivery, including taxes, have fallen 22% in just six working days, ICIS figures show.

The operator has been forced to enter the market to buy volume in four of the first five days of September, after buying on 14 gas days in August.

In total, National Grid bought 34 million cubic metres (mcm) in August and has bought 9mcm in September so far.

This is in stark contrast to August 2016 when National Grid sold 16mcm to shippers over five distinct gas days.

The need to export gas during the summer, due to the closure of the Rough storage site, has put strain on the grid as shippers look to fill sites in mainland Europe.

But the reverse problem is less likely to happen when the gas is brought back during the winter, due to Britain’s diverse and substantial import capacity (click here to read story).

While exports have been turned down in September, extensive maintenance on the Norwegian and British upstream sectors has reduced supply coming into the market.

National Grid’s entries into the market are relatively rare, with shippers typically taking it upon themselves to balance the grid – or face penalties.

Shippers are incentivised to remain in balance as they are forced to sell gas above the system marginal price (SMP) when they are in excess and buy below the SMP when in deficit.

Despite the recent actions, market intervention over the longer term remains down on historic levels. In January, National Grid told ICIS that it bought and sold 143mcm over the 2015 gas winter, 32% less than the previous winter and 42% less than in gas winter 2013 (click here to read story). thomas.rodgers@icis.com