Government washes its hands of high gas prices

A government minister has criticised heavy gas users like Terra Nitrogen for not buying more of their gas on forward contracts.

Malcolm Wicks, the minister for energy, told the House of Commons that companies had chosen to buy gas on the spot markets, and could not blame the government for high prices.

“It is one private company signing a contract with another, and they are suffering from very high prices.

“We are concerned about that and we are working with them, but… we do not need someone posing as a shadow Stalinist Minister of Power saying that the Government should take command.”

Terra announced at the weekend that it was turning down the production of ammonia – a key ingredient in Nitram fertiliser – because of high spot gas prices.

The company will produce what it can from gas bought in advance on the futures market, avoiding the costly spot market, where gas prices peaked this week at 170p/therm – up from 31p/therm at the start of November.

Fertiliser director Stuart Beer said: “We would have to charge more than £200/t to break even at today’s gas price, and there aren’t many farmers falling over themselves to buy January stocks at £170/t plus.”

But he insisted the move would not affect fertiliser supplies, because production was continuing from stocks and imported cargoes of ammonia.

Nitram orders that were already placed with the firm would be honoured, he added.

But Mr Beer was critical of the government for failing to ensure that the gas market worked properly.

He called for ministers to ensure that gas pipelines and import terminals were operating at full capacity, and appealed for compensation for industrial has users in the event of supplies being rationed.

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