TISC PN05 0506



Telephone: 020 7219 5777/5779

PN 5 of Session 2005-06


Security of the gas supply

The Trade and Industry Committee has decided to conduct a short inquiry into the UK's gas supply, in light of fears of a shortage of gas this winter and the resulting rise in gas and electricity prices for both domestic and industrial/commercial customers.

When the previous Committee produced a Report on the wholesale gas market in March this year (Fuel Prices, Twelfth Report of Session 2004-05, HC 279-I), the Government and Ofgem (the gas and electricity markets regulator) expressed confidence that the market was robust and that, though gas supplies would be tight for a year or two, the peaks in gas prices - witnessed especially in the autumn of 2004 - were a temporary phenomenon which would disappear as further gas supplies came on line. Since then, forward gas prices, especially for those trying to fix contracts for a year at a time, have remained unusually high, with reports that some industrial customers are being quoted prices up to 50 percent higher than those quoted last year.

Moreover, some commentators have suggested that Hurricane Katrina may exacerbate the problem because of its effects on the USA's gas production facilities and the consequent growth in American demand for imported LNG (Liquid Natural Gas). There is therefore a possibility that LNG destined for the UK will be diverted to the USA.

In these circumstances, the Committee has decided to undertake a brief review of the developments in security of the gas supply since the last Report. It does not intend to re-open all the issues covered in the earlier inquiry, but instead it wishes to focus on whether the supply situation in the coming winter is likely to be about the same, better or worse than predicted in February this year; and, if worse, what the consequences will be, and what the Government's and Ofgem's responses to the problem should be.

The Committee would welcome written evidence on the issues outlined above from anyone who wishes to comment. The closing date for written evidence on these issues is Tuesday 25 October.  The Committee hopes to take oral evidence in November. 

If possible, written evidence should take the form of a memorandum with numbered paragraphs and should be submitted, as a MS Word document, by e-mail to tradeindcom@parliament.uk with a single hard copy sent to the Clerk at the address above.

For further information please contact the Committee Office on 020 7219 5777/ 5779.

27 September 2005