Cheap gas is helping the UK cut its carbon emissions this winter, without any recourse to taxpayer-funded incentives.
It is a win-win situation for the environment and energy consumers, although some producers may be struggling to make ends meet.
"As gas prices have fallen we have switched all our gas fired power plants on, which we weren't expecting to do this time last year or certainly two years ago," Simon Bonini, the director of LNG (liquefied natural gas) at the British utility
, told a
this week.
"Instead of coal being the baseload supplier of power in the UK, it's actually gas right now."
Gas demand in the damp, chilly British Isles usually surges in winter due its popularity as a heating fuel. That usually pushes up its price, causing power generators to switch to burning coal. But now there is so much gas flooding into the UK that Centrica and other owners of gas-fired power plants expect to run their facilities flat out, around the clock, all winter.
Amid a global gas glut, two new LNG import terminals opened in Wales earlier this year to receive supplies from as far away as Qatar. Britain has become a preferred destination for LNG exporters who have recently been scrambling to unload spot cargoes of the fuel at whatever price they can get.
Continental Europe has less flexibility than Britain to absorb excess LNG supplies, because it is locked into long-term contracts to buy pipeline gas from Russia and other major exporters. Gas demand in Europe is forecast to fall by about 10 per cent this year, due to the economic downturn.
The North American market, meanwhile, has lost much of its allure for LNG shippers because gas prices in the US and Canada are even lower than in the UK.
Nevertheless,
delivered its
this week, when the Mesaimeer tanker delivered the equivalent of 5 billion cubic feet of gas to the
LNG terminal in Newfoundland. The shipment was Qatar's first to the east coast of North America. It provided a further sign that the tiny Gulf state that has become the world's leading LNG exporter is serious about extending its market reach as it continues a major expansion of its production capacity.
As yet, there are no clear signs of an expected switch to gas from coal for baseload power generation in the huge North American energy market. That is because the US, in particular, has ample coal supplies and a powerful and active coal industry lobby.
US industrial gas demand has fallen sharply due to the recession. It dropped 11 per cent in the first nine months of this year, according to a recent
. New York gas futures, meanwhile, have been seasonally week this past autumn and early winter since touching a 7-year low in September.
North American gas producers will not be cheering the arrival of competing supplies from Qatar. Despite the current low gas prices, they may need government help to displace coal as the continent's major fuel for power generation - a development many environmentalists say is sorely needed.
Pic courtesy of ADNOC
