Leaks contribute to continuing high energy bills

21 October 2008

The majority of gas used in the UK is imported from the North Sea. Frequent leaks on North Sea gas pipelines are contributing to gas becoming an expensive and unreliable fuel source. Regular inspections, investigations into the cause of these accidents and taking the relevant actions to prevent future incidents may prevent unnecessary fluctuations in oil and gas prices in the future, but perhaps not for some time.

Kvitebjørn platform

Such inspections and maintenance may help prevent unnecessary changes in wholesale energy costs and the money saved could be used to improve gas storage. The lack of facilities in the UK prevent energy companies storing gas when it is available at low prices. The UK has the capacity to store around 13 days of gas, compared to Germany with 99 days and France with 122 days.

The Petroleum Safety Authority Norway (PSA) has initiated an investigation of the hydrocarbon leak that occurred on the Oseberg C facility owned by StatoilHydro, on Friday, 12 September 2009. All hydrocarbon leaks entail a hazard, fire and/or explosion will result if a hydrocarbon leak is ignited. Such incidents constitute a significant hazard for personnel on board, the facility itself and the surroundings as well as a potential environmental impact.

An inspection conducted after confirmation that the facility had been depressurised revealed a rupture in an equalisation line. In accordance with the routine response, all personnel mustered at the lifeboats but no one was injured in connection with the incident – which led to a general alarm and shut-down of production.

In the autumn of 2007, another pipeline operated by StatoilHydro, was dragged out of position by a ship's anchor. An incident that caused wholesale gas prices to jump 14% in one day. In January this year, the pipeline was qualified for temporary use pending a permanent repair, this summer however it was decided not to make the permanent repair until 2009. A decision made despite a leak being discovered in the same part of the pipeline that was damaged last autumn, around 10 kilometres from the platform.

StatoilHydro will now consider various repair solutions for the pipeline and on this basis, it will be decided when operation of the pipeline and the Kvitebjørn field can be resumed. Turnaround operations are presently being carried out there and at Kollsnes, so the pressure in the pipeline will now be further depressurised and emptied via flaring. The Visund platform normally utilises the Kvitebjørn pipeline for gas export, but has reinjected gas during the turnaround. Oil production is however being maintained, but at a somewhat lower level than usual.

StatoilHydro claim that their gas customers are unlikely to be affected by these incidents, but energy bills in the UK are at an all time high. Gordon Brown and ED Mayo of Consumer First are putting public pressure on power companies to cut their gas and electricity prices. Many gas companies have blamed the high costs on rising world oil prices. However, oil prices have now fallen, to less than half the highs seen in July, yet electricity bills have hardly come down at all. One of the reasons for this is that many of the large energy retailers will buy enough oil to supply them for months, sometimes even years in advance to protect themselves against fluctuating wholesale prices. Therefore, many companies will have already bought their oil for this winter at the higher costs seen earlier this year, and are hence unlikely to sell it at a lower price. Prices could stay high next winter too. Wholesale gas prices for delivery in the winter of 2009/10 are approximately 70 p per therm, roughly the same as today’s prices.