Britain facing gas shortages as the country is gripped by one of the coldest winters in a century

Britain is facing the gas shortages as the country faces the coldest winter in many years. This is bullish for both oil and US natural gas as LNG cargoes will be diverted towards the UK as UK prices spike higher. UK prices can be much more volatile than North American prices due to the small size of the market and very limited storage capacity in the UK.

I've attached an article from this morning's telegraph with more details:

Britain facing gas shortages as freezing weather continues

Britain is braced for the prospect of running short of gas as the country is gripped by one of the coldest winters for a century.

By Murray Wardrop
Published: 6:52AM GMT 05 Jan 2010

Britain is facing the prospect of gas shortages as cold weather continues Photo: PA
For the second time ever, the National Grid yesterday issued a warning to energy providers that demand for gas is threatening to outstrip supply.

Weather forecast for Britain
The ultimatum comes after a 30 per cent rise on normal seasonal demand as snow and freezing conditions continued their stranglehold on Britain.

The concerns caused natural gas prices to jump to their highest level in 10 months yesterday, touching 45p a therm.

While it is unlikely that households will find their supplies restricted, a shortage could lead to higher bills.

The National Grid, responsible for meeting the country's energy requirements, issued a gas balancing alert (GBA) yesterday to give warning that any further falls in supply could force big users like power plants to cut their consumption.

Extra gas supplies were rushed out to the liquefied natural gas importation terminal in Kent through pipelines in Belgium and Norway following the alert.

The National Grid said the risk of shortages had been temporarily averted by the influx.

"Supplies of gas to the UK have increased following the issuing of a gas balancing alert today," a spokesman said.

He added: "The big generators like E. ON have gas-fired power stations and coal-fired power stations. They can choose to switch from gas to coal.

"(Yesterday) we thought there was going to be a certain amount of gas going into the country and then a few suppliers, their supplies dropped off.

"They weren't going to be able to provide the amount that we thought, so we issued a GBA so hopefully that's going to bring it back to where it should be."

The first time a GBA was used was in March 2006.

GBAs are a way of warning customers to ease off on the fuel as well as encouraging suppliers to bring in more gas, which Britain relies on imports for.

The fuel is used to heat about two thirds of Britain's homes.

Freezing weather is set to stay in the coming weeks, and the National Grid has not ruled out sending out further supply warnings.

In the event of a serious shortage, big industrial consumers are expected to bear the brunt of gas consumption cuts to shield residential users who rely on the fuel to keep warm.