Promises, Promises...














Well, they told us all these wonderful new gas import projects would be up and running in time, they told us the high prices over the last two years would come down. They told us all these wonderful projects would guarantee "security of supply" to Industry and the Consumers of Britain.

And they told us we could still use our Christmas tree lights and put the kettle on when the ads come on during Corrie. And they told us wrong. We're now told that we face "another winter of soaring prices and power shortages". Better get used to it. The DisUnited Kingdom sits at the end of a pipeline network that starts in Russia, and North Sea gas reserves are running down fast.

In effect, North Sea gas provided the UK with a kind of "supply cushion" that, to some extent, insulated us against the vagaries of the international energy markets. With these reserves now in rapid decline, those days are effectively over. Now we will pay the real price of privatisation.

But for the free-market diehards who have pushed this project, LNG is a wonderful thing. New technology, bigger ships and massive LNG terminals will allow gas to become a truly global trade. Middle Eastern producers like Qatar, in particular, are laughing all the way to the Royal Bank of Scotland. The world is now their oyster.

But what about the "contracts" that have been signed to bring in gas to Milford Haven, Teeside or the Isle of Grain? Milford Haven may not be up and running, but industry insiders say that the other two terminals are running below capacity.

So why are forward prices for gas and electricity already up some 30%?

When the government was crowing on about how these new LNG terminals would ensure a plentiful supply of gas for the foreseeable future, what they forgot to mention was that the contracts to ship gas into these terminals include "diversion clauses" that mean that ships can be diverted to other, higher priced markets, where the return is higher. The Shippers call the shots, not the government, and they can go where they damn well please.

These LNG privateers are now roaming the high seas in search of the highest return. They will come to Britain in the end, but not quite yet. They'll wait for prices to rise here first, so that they can make a decent killing.

But for now, with better returns to be had in Japan and South Korea, we'll just have to accept that, in the new, globalised, privatised, energy scarce world we are living in, winter price spikes are going to become business as usual.