Algerian LNG Is Moving To UK As Europeans Scramble For Gas Supplies.

After 41 years, when Algeria's first shipment of LNG went for the UK, the Algerian state concern Sonatrach is sending an important volume of liquefied methane to the British market. The shipments to BG group began several weeks ago. Qatar is shortly to begin building up LNG exports to Europe.

As many countries have found, it often takes a good panic to produce an energy policy. That is what is happening in the UK, where a modest spell of cold weather has raised serious worries about high prices and shortages of natural gas. The UK has moved from being a net exporter of gas to a net importer. It was perfectly foreseeable that there could be delays in having the infrastructure ready to start importing more gas from Norway, continental Europe and further afield.

Deregulation and liberalisation have helped produce a decade of very cheap gas, but have neglected the issue of energy security. Now demand for Algerian and other LNG in the UK is very strong. Despite some gas supply hiccups this winter, the share of power generated by natural gas in the UK will go on rising beyond its current 40%.

Natural gas is a versatile, relatively clean fuel, and LNG can be bought from the spot market. Most LNG exporters have managed to stretch their capacity for spot LNG to be available when the price is high as has been the case in the UK.

Like most of the rest of Europe and North America, the UK can easily import LNG from more than one source. But its capacity to receive LNG is limited. It will only be in late 2007 that new LNG-receiving and re-gasification terminals will be ready in Britain.

There is, however, a scramble for LNG among some European countries which have such terminals. This in itself creates a form of energy security which is not, for instance, open to Japan - the latter being almost wholly dependent on imports for oil and gas and having to rely on very few sources (the Gulf for oil, Indonesia and Australia for LNG).

Hence a scramble between Japan and China for Russia's oil and gas. But energy security can also lie in maximising the types, as well as the sources, of fuel. So the UK government should ponder the implications of getting too much gas, not too little, over the longer term.

The problem is that a shortage of natural gas in Europe is being caused by declining supplies by pipeline from Russia. The rise in gas's share of UK power generation from zero to 40% in little over a decade increased energy diversity, but if it were to continue rising, diversity would decrease - and possibly security as well.

This is for the long run, however. Qatar's emergency as a major LNG supplier to Europe is a welcome development. Qatar has more than 4.7m t/y of LNG for Europe.

Critics of fossil fuels in the UK promote renewables. Although some experts say it will take a long time for renewables to become competitive, other argue they already have become competitive with crude oil and natural gas prices being so high and likely to remain high through the next five years at least.

The British critics of fossil fuels insist that next review of the UK's energy security should explain the government has a role in setting an energy mix - and they insist that the mix should include nuclear power as well as renewables. If countries leave their energy mix entirely to the market, those with coal, the planet's most plentiful fuel, will go on burning it. Not necessarily so. Coal can produce clean fuels, both in liquid form as a gas; technologies making such fuels reasonably cheap, compared to current gas and crude oil prices. Coal cannot be burned with impunity any longer, because of climate considerations. In its last energy review, the UK government was still in favour of leaving its energy mix broadly to the market. The critics of fossil fuel users are right, that is no longer tenable (see Oil Market Trends of this week).