Where's the gas? Scandal of the half-empty Interconnector

Users demand that National Grid be given control of spare capacity on the pipeline linking the UK to Europe
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The Independent Online

Leading manufacturers fear that energy prices are being forced up thanks to Britain's BG, German energy giant E.ON and Russian monopoly Gazprom controlling a pipeline importing gas from Europe.

Some of the UK's biggest energy users are demanding that these three, and four other partners in the Interconnector pipeline, hand over its spare capacity to National Grid.

Despite record gas prices in Britain - almost double those in the rest of Europe - the pipeline has only been operating at half capacity this winter.

The Energy minister, Malcolm Wicks, has called for an investigation into why the Interconnector is not being used fully.

Some manufacturers allege that the rates charged by the company running the pipeline are not competitive. A spokesman for the Interconnector company said anyone could book spare capacity at market rates. He blamed bottlenecks in the rest of the gas network in Europe for not supplying enough gas.

Jeremy Nicholson, the director of the Energy Intensive Users Group, said that National Grid, which balances electricity supply and demand, should do the same for gas in the pipeline.

One solution being submitted to the energy regulator, Ofgem, and the Government next month would be for the pipeline's owners to hand its spare capacity to National Grid during peak demand, he said. National Grid would then find buyers for the gas.

"It is not clear under what terms the capacity can be sold," Mr Nicholson said. "The pipeline is not subject to the same price controls as those in the UK."

It was also not clear why it cost so much more to transport gas from Europe, he said. "The allegation is that sometimes the capacity is only made available to non-Interconnector shippers at a price which seems to equal the difference in the market price in gas on either side of the pipeline." This, in effect, maintains the high price in the UK.

Companies such as chemicals manufacturer Ineos Chlor are already worried about prices for next winter, which are currently at almost 90p per therm, 50 per cent more than current spot prices. Andy Waring, the energy purchasing manager for Ineos Chlor, said that it was difficult, as an end user, to get direct access to the pipeline.

Mr Wicks raised the pressure on Interconnector and its owners earlier this month when he called its performance "disappointing". "It is in Europe's and the United Kingdom's interests that it should be used at full capacity," he told the House of Commons.

The pipeline, which runs from Zeebrugge, Belgium, to Bacton in Norfolk, has sufficient capacity to supply around a tenth of Britain's average winter gas needs.

With eight other suppliers, its owners have bought its entire capacity until 2018, subcontracting some of this capacity out to third parties. As well as Gazprom, E.ON and BG, the French firm Total, Italy's ENI, US group ConocoPhillips and Belgian company Distrigas also own stakes.