UK Seeks 20-Year Gas Deal With Norway to Avoid Winter Blackouts
Comment of the Day

October 04 2022

Commentary by Eoin Treacy

UK Seeks 20-Year Gas Deal With Norway to Avoid Winter Blackouts

This article from Bloomberg may be of interest to subscribers. Here is a section:

The UK is in talks with Norway to secure a natural gas contract of potentially 20 years in a bid to stave off the risk of winter blackouts, a person familiar with the matter said.

Ministers are discussing a price with their Norwegian counterparts, according to the person, who asked not to be named discussing sensitive matters. The business department didn’t immediately respond to a request for comment.

Because of the length of contract under discussion, there’s a risk that locking in long-term gas contracts now might leave the UK exposed to high costs in years to come. Current volatility means producers could demand higher prices to guarantee strong profits as it’s unclear how much money they could make by selling on the spot market in the future instead.

Eoin Treacy's view

Forced buyers are never going to get the best price regardless of how amicable the relationship is between Norway and the UK. However, if that is the only way to ensure security of supply over the coming couple of years, it may be a price worth paying.

It is impossible to ignore how the dearth of leadership and long-term thinking has hobbled the UK’s response to this crisis. It was obvious after the UK became an energy importer that it would be a price taker and yet nothing has been done to correct that situation. Energy independence is going to be a buzz word just about everywhere for the next decade.

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