UK Gas Prices Surge To 3-Month Highs As Norway Workers Strike

European energy crisis escalates amid interruption of production in Equinor oil and gas fields

Norwegian gas supplies to the UK could be disconnected this weekend if a dispute over pay for oil and gas workers intensifies, a pipeline operator has cautioned. The European gas crisis has escalated after one of Norway’s largest operators was pushed to close three oil and gas fields after workers went on strike.

UK gas prices hit three-month highs on Tuesday as the energy company Equinor said that the fields on Norway’s continental shelf, which supply the equivalent of 89,000 barrels of oil a day, would halt production.

Norway’s oil workers’ union, Lederne, said the strike would stretch out to three other sites, having an impact on 333,000 oil-equivalent barrels a day, including 264,000 in natural gas. If the strike intensifies, it could affect over 1 million barrel equivalents every day or about 60% of Norway’s exports from Saturday.

Gassco, Norway’s state-owned pipeline operator, informed the Financial Times that “in a worst-case scenario, deliveries to the UK could stop totally”.

It said the strike could force the shutdown of Sleipner, a distribution hub on the gas pipeline to Easington on the northeast coast. The hub is positioned on the Langeled pipeline, which was initially known as “Britpipe” and is among the greatest subsea pipelines in the world, linking Easington with the Nyhamna terminal in Norway.

UK Gas Crisis Keeps Intensifying

The terminal at Easington delivered 70% of UK imports from Norway between January and April this year and was responsible for 67% of imports from Norway last year.

However, Josef Pospisil, head of utilities at Fitch Ratings, downplayed the risk to consumers from the possible shut-off. He said:

“We do not expect a significant impact from a short-term reduction of supplies from Norway on gas availability in the UK, as the latter has been receiving record volumes of LNG cargoes of late.”

Workers are asking for a pay rise to handle soaring inflation, which has been fanned in part by a surge in oil and gas prices since Russia invaded Ukraine.

Britain’s day-ahead gas price hit a three-month high of 272.5p a therm on July 5, a rise of 17.9%. Gas for delivery prices for next month climbed 7% at 302p a therm.

The Norwegian strikes have elevated the squeeze on supplies after a decrease in gas coming into the EU from Russia. European nations have been grappling to fill up their gas storage sites before the winter for fear that Russia will discontinue supplies altogether.

Germany has drafted laws that enable the government to seize stakes in companies affected by the surge in gas prices. Uniper, which owns plants in the UK and Germany, is in talks with the German government over a bailout.

UK’s business secretary, Kwasi Kwarteng, has been working with businesses to build up Britain’s energy supplies before winter. Britain sources about a third of its gas from Norway and the rest from a combination of Europe, the North Sea, and imports liquefied natural gas from the rest of the world, including the United States.

The jump in commodity prices since the start of Russia’s invasion of Ukraine has also been the cause of pain for Britons at the pump.

Amid protests over elevated fuel prices, the RAC said the average cost of a litre of petrol hiked 16.59p in June, beating the previous 11p record set rise in one month in March. The cost of a litre of petrol climbed from 174.84p to 191.43p and diesel climbed by 15.62p in June, ending the month at 199.05p.

Retailers have been criticized for profiteering and the Competition and Markets Authority is this week expected to report back to the government after a study into the market. The RAC fuel spokesperson, Simon Williams, said:

“The rate at which pump prices have been rising over the last four weeks is hard to comprehend. Not a day in June went by when petrol prices didn’t go up, even though the price retailers pay to buy fuel went down.”

“There’s no doubt that drivers are getting an incredibly raw deal at the pumps at a time when the cost of living crisis is being felt ever more acutely.”