National Grid defends move to limit UK LNG imports

The chief executive of National Grid has defended the company’s decision to limit imports of liquefied natural gas arriving on the UK’s west coast, despite coming under fire from energy companies including Germany’s RWE.

The FTSE 100 company last month applied to Britain’s energy regulator to limit LNG capacity arriving at facilities in south Wales over fears Britain’s national gas network could become overwhelmed.

More LNG has been arriving at facilities in south Wales to be exported to continental Europe via the UK. Two gas interconnector pipelines that link Britain with Belgium and the Netherlands have been running at capacity, exporting unprecedented levels of gas this year as European governments battle to cut energy imports from Russia.

However, National Grid chief executive John Pettigrew insisted the temporary capacity limits in south Wales were necessary to keep Britain’s gas transmission network from breaching safety limits.

The LNG glut has been driving down spot wholesale prices in the UK in recent weeks, although this is not expected to have a dramatic effect on consumer bills in the near-term given most energy suppliers buy their requirements months in advance.

Energy regulator Ofgem approved National Grid’s request this month but companies including RWE warned, during a consultation on the changes, that the capacity limits were “unnecessarily conservative” and would “deter LNG imports”.

RWE said it was “surprised” National Grid had used the scramble in Europe for alternative gas supplies as a reason to reduce capacity arriving at Milford Haven in south Wales, adding: “In our view, it [the geopolitical situation in Europe] is a reason to find ways to maximise possible throughput and attract LNG, not to propose arrangements that achieve the opposite”.

Pettigrew said National Grid’s proposals had been motivated by “physics” and a desire not to heap additional costs on UK consumers if the pressure in the transmission system rose towards unsafe levels, forcing it to constrain flow.

“You can only inject so much” gas into the UK system “if you are not using it in the UK otherwise pressures rise and you have a safety issue”, he insisted. “That is just the reality of the physics of the network.”

National Grid remains in charge of Britain’s electricity and gas systems, ensuring they operate within safe limits. However, many of its oversight responsibilities will be moved to a publicly owned body under government plans published this year. The company also owns electricity and gas infrastructure in Britain and a number of subsea power cables to Europe.

Pettigrew said the only way of further boosting gas exports to Europe would be to build additional pipelines in the UK. “Obviously that would be a multiyear investment, not to the benefit of UK consumers but to European consumers,” he said.

National Grid on Thursday reported underlying profits of £4bn for the year to March 31, an 11 per cent increase on the previous 12 months, helped by higher revenues from its electricity interconnectors linking Britain to countries including France and Norway.

Pettigrew acknowledged the cost of living crisis facing millions of British families and said the company had recently agreed with Ofgem to return £200mn of interconnector revenues to bill payers.