Glencore-backed U.K. gas shipper CNG Group Ltd. will stop providing gas to its utility clients, a move that further endangers the British energy market. As a gas shipper, CNG Group supplies wholesale natural gas to retail gas suppliers who then in turn serve domestic and business end-user customers. The firm has around 18 utility companies on its books, including its own retail arm.
A shipper’s role is to manage the flow of gas in and out of the networks so buying and monitoring the gas from injection at the North Sea until it reaches your gas meter at home and your supplier takes over.
With utility suppliers such as Utility Point recently exiting the market, CNG Group has suffered losses in its wholesale customer base.
The Chief Executive at CNG, Paul Stanley, has said, “the company has been forced into an impossible position”.
This is in part due to the rise in cost of the wholesale gas in 2021. Gas prices have risen by 250% as a result of a number of factors, including a cold winter at the start of the year which decreased stocks. Additionally, there has also been a high demand for liquefied gas across Asia and the market has seen a drop in supplies from Russia.
These unforeseen conditions have increased pressure on UK energy suppliers. The suppliers are unable to pass the cost onto their customers due to Ofgem’s energy cap. Unlike when a supplier exits the market in the UK, there currently isn’t a process for a shipper of last resort so at the time of writing, it is not clear who might pick up stranded customers. It’s possible that companies will need to secure new supplies which will in turn drive the cost of utilities further upwards.
The energy regulator Ofgem said processes are in place to make sure gas supplies continue uninterrupted.
This article was written by Georgia Dutton (ICON)
