Gas plant blast plunges Europe into energy chaos

Italy and the United Kingdom have seen prices surges after explosion at Austrian hub kills one and injures dozens

Austria's main gas pipeline hub at Baumgarten, Eastern Vienna, where an explosion rocked the site. Tomas Hulik / AFP

Austria's main gas pipeline hub at Baumgarten, Eastern Vienna, where an explosion rocked the site. AFP

Gas pipes are pictured at Austria's largest natural gas import and distribution station in Baumgarten, Austria in this file picture from 2014. Heinz-Peter Bader/ Reuters

Emergency crews are seen attending to a fire after reports of a gas explosion in Baumgarten, Austria. RKNO / Motz via Reuters

Emergency crews are seen after reports of a gas explosion in Baumgarten, Austria on December 12, 2017 in this picture obtained from social media. RKNO / Motz via Reuters

Emergency crews are seen attending to a fire after reports of a gas explosion in Baumgarten, Austria. RKNO / Motz via Reuters

Firefighters stand outside a gas plant after an explosion occurred near Baumgarten. Ronald Zak / AP Photo

Emergency crews are seen attending to a fire after reports of a gas explosion in Baumgarten, Austria. RKNO / Motz via Reuters

An explosion on Tuesday morning at a key gas installation in Austria killed one person and threatened to plunge European energy networks into chaos at one of the heaviest periods of demand in the year.

Italy’s economic development ministry declared a state of emergency after the country’s Russian gas imports were temporarily cut off, and the United Kingdom saw energy prices surge.

Social media footage showed a raging fire burning high into the sky, but terrorism has apparently been ruled out as a possible cause of the blast. Gas Connect Austria, which operates the Baumgarten site in eastern Austria, said the fire had been brought under control and police added that the cause was technical in origin.

“There was an explosion around 8.45am and a fire,” a police spokesman said. “A wide area has been sealed off and there are expected to be several injured.” The local fire brigade confirmed there had been a fatality and added that 18 people had been injured, one seriously.

A representative of OMV, the company who owned the plant, Elena Menasse said: “We can confirm that there’s been an explosion … on the grounds of Baumgarten natural gas station. Gas Connect Austria is the operator, and OMV’s stake is 51 percent. There’s been an explosion and there’s been serious fire, which has been contained to a few small fires and now the fires have already stopped.”

Gas prices began soaring as soon as news of the incident emerged, with same-day gas rates in the UK up 40 per cent to 95 pence per therm, its highest price in four years. Front-month deals, futures contracts which fall due in January, also rose almost 25 per cent. The Italian day-ahead price surged 87 per cent to 44.50 euros per megawatt-hour.

The Baumgarten hub, a facility 50km to the northeast of Vienna and close to the Austrian border with Slovakia, handles around 40 billion cubic metres a year which is almost a tenth of the gas used across Europe. OMV is a quarter owned by the Mubadala Investment Company, and earlier this year signed a deal with Adnoc that covered cooperation on new downstream projects, refining operations, refinery-petrochemical integration and optimisation, and technical and maintenance support.

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The plant was first opened in 1959 on the site of a spent gas field and began transporting flows from Russia, Europe’s biggest gas supplier, nine years later. Russian energy giant Gazprom announced on Tuesday that it “is working on redistribution of gas flows and does its best to secure uninterrupted gas supplies to the clients on this transport direction.”

Immediately after the explosion, Italy’s imports of gas through the Tarvisio-Malborghetto pipeline were completely halted, causing the announcement of a state of emergency. Storage facilities were covering half of the country’s domestic demand according to Snam, the Italian natural gas infrastructure company.

“On the basis of the information currently available, supplies could resume today if the first indications on the absence of damage to transport infrastructure are confirmed. In the meanwhile, the security of the Italian system is guaranteed by the storage facilities made available by Snam,” a statement read.

The United Kingdom is set to be particularly affected due to the perfect storm of a cold snap, disruption to supplies from the North Sea and the closure of the country’s largest storage facility. Prices had already been rising on Monday after a hairline crack in a pipeline halted production from gas fields that used the Forties pipeline network. That network’s Norwegian manager said on Tuesday flows would be trimmed from Troll, Europe’s largest offshore gas field.

Compounding the problem for the UK has been a harsh start to winter that has seen temperatures plunge below their usual range – Monday night was the coldest of 2017. To make matters even worse, the Rough natural gas storage facility, a depleted gas field 18 miles off the coast of Yorkshire, was closed this year by Centrica after more than 30 years in operation. Rough carried up to 10 percent of peak winter gas demand.

To make up the shortfall caused by the incident at Baumgarten, Britain may require supplies to be delivered by liquefied natural gas tankers; however, it takes around 14 days to bring LNG from Qatar, the UK’s primary supplier, and there is only one scheduled delivery taking place in December. Another option would be to import supplies from Russia’s Arctic plant Yamal LNG, which could arrive in just five days.