Gas Stockpile Drain Prompts Price Rise Fears

Britain has drained its gas reserves so much after weeks of bad weather that fears have been raised of a looming spike in energy prices.

Households have been forced to increase their heating usage as the freezing weather continues, pushing the demand for gas to 20% higher than normal in March.

Gas stocks were reportedly just 10% full at Britain's largest storage facility on Thursday night, compared to 49% this time last year.

Energy prices will soar if Britain is forced to make up the shortfall by importing more liquefied natural gas from elsewhere, an energy expert has warned.

Andrew Horstead of the energy consultancy Utilyx told the Times: "There is immense pressure on the existing infrastructure.

"We are almost maxed out from imports through pipelines. The big concern is that there is very little flexibility left in the system."

He added that Britain would struggle to cope if a technical problem caused an unscheduled North Sea gas field to shut down.

Matt Osborne, risk manager at energy consultancy and brokerage firm Inenco, told Sky News that wholesale prices had spiked about 20% overnight, prompting the industry to respond quickly.

On Friday morning gas prices for within-day delivery then jumped more than 50% above Thursday's close following the closure of the pipeline linking Belgium to Britain after a pump failed at Bacton, Norfolk.

Downing Street said Prime Minister David Cameron is "confident" that the UK's gas needs will continue to be met.

A spokesman said:  "The absolute key thing on this is that supplies are not running out.

"The gas market is how we source our supplies and that market continues to function well.

"The Prime Minister's key concern is that gas supplies continue. It is absolutely clear that supplies are not running out."

Asked if the Prime Minister was confident that this would remain the case, the spokesman replied: "Absolutely confident."

Britain is more vulnerable than other countries to gas shortages because of its limited storage capacity, which holds just 15 days' worth of energy supplies.

But a Department of Environment and Climate Change (DECC) spokesperson insisted that "gas supplies are not running out".

The spokesperson said: "Storage levels are low at the moment - as you'd expect towards the end of winter - and the UK gas market is tight.

"But the market is responding as it is designed to do - gas prices are rising and supply is being maintained accordingly.

"Gas storage would never be the sole source of gas meeting our needs, so it is misleading to talk purely about how many days' supply is in storage."

However, the gas fears come as the head of the energy giant SSE warned of the "very real risk" of the lights going out in Britain.

Ian Marchant said the Government was underestimating the problem, as he announced plans to cut back on power generation at five sites because the stations are either uneconomic or coming to the end of their lives.

He said: "It appears the Government is significantly underestimating the scale of the capacity crunch facing the UK in the next three years and there is a very real risk of the lights going out as a result."

He said the energy watchdog Ofgem had recently expressed real concern about the reduction of the UK's generation capacity margin that would follow expected plant closures in the next few years, predicting a 1-in-12 chance of the lights going out.

Mr Marchant added: "It is unlikely that the majority of the reductions in generation capacity and the delays to new investment we have announced today will have been included in this analysis.

"(This) highlights that the situation is likely to be even more critical than even they have predicted."

The DECC spokesperson added: "We are in close contact with National Grid, who are able to step into the market to source gas and increase incentives on gas suppliers if they think there is a risk of a supply shortfall."