Centrica are set to increase and extend its gas contracts with Norway and Russia, leaving the UK relying precariously on imports to meet domestic demand.
Centrica will increase its contracted supply with Norway’s Statoil by 50 per cent, and with Russia’s Gazprom by 75 per cent in order to make up the shortfall left by dwindling North Sea supplies.
The exposure to Russian gas imports in particular has raised concerns that the UK is increasingly dependent on supplies, which could face disruption after rising tensions due to political moves by Russia or international sanctions against the country.
Worrying news that Russian leader Putin has growing leverage over the UK with our reliance on Russia’s commodities.
Fear not though, as Centrica has struck its agreement with Gazprom’s UK subsidiary, which can source supplies from outside Russia if need be, leaving the UK less vulnerable to problems relating to Russia.
A Centrica spokesman said he was confident that the subsidiary, Gazprom Marketing & Trading, would be able to fulfil its contract:
“Russia provides about 30 per cent of Europe’s gas imports of about 440bcm a year,” he said.
“Without Russian volumes, Europe’s supply and demand balance would change significantly, impacting the ability of the UK to import materially from continental Europe, or impacting the cost of doing so.”
Centrica’s senior managers warned at the group’s annual general meeting that Europe will remain dependent on Russian gas for years to come, and dismissed suggestions that the EU can replace it with other sources as “unrealistic”.
“You can’t switch that amount of gas off easily without huge consequences. There is no way the United States can supply that volume of liquefied natural gas to replace it,” said the group’s chief executive, Iain Conn.
Russia has been a “reliable supplier of gas all the way through the Cold War”, and it needed European demand too, he added.
So we can breathe a sigh of relief. For now.