Thursday, February 25, 2010

Close to the edge of the woods

I had a written ministerial answer that demonstrated that gas was being exported from storage. The minister rightly pointed out that some gas was imported from Holland and other gas exported to Belgium.

In a sense we are now in a typical situation. Commercially if anyone takes the risk of reinjecting gas into storage they also face the risk of either keeping it for a year or selling it at a loss.

At the same time we cannot be certain what the weather is going to be. Normally it would not be that cold from now. Hence no-one seems to be reinjecting gas.

On the other hand the weather forecast at netweather now is a bit coldish. However, we cannot be certain that this will either be true or indeed last.

Hence the country faces quite a big risk. It is one of those situations where the importance of the risk is high, but the probability of the risk low. However, the cost of taking preventative action (viz having some stored gas) is actually not that high.

However, this risk is something the market should take as a whole for reasons of energy security rather than individuals taking the risk on the basis of a calculation as to whether or not they will make a return.


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