* UK gas prices rise 50 pct to 108 pence per therm
* Brent pipeline shuts after Cormorant Alpha leak
(Recasts, adds background, detail)
By Karolin Schaps and Giancarlo Navach
LONDON/MILAN, March 4 UK gas prices hit a
five-year high due to Norwegian supply troubles on Monday and
Italy was cut off from Libyan gas after militia fighting, laying
bare European energy markets' vulnerability to increasingly
vital foreign imports.
Oil and gas production in Europe's main energy consuming
nations has been declining, while demand is rising, making
countries more and more dependent on foreign supplies.
In Britain, an unplanned cut in gas imports from Norway, its
main foreign gas supplier, lifted prices to their highest in
five years and a hydrocarbon leak at a North Sea platform shut
the pipeline exporting Brent crude, one of four North Sea oils
setting the benchmark price.
The shutdown forced Total to halt all oil and gas exports
from its North Sea Alwyn Area, which comprises five fields:
Alwyn North, Dunbar, Ellon, Grant and Nuggets.
Analysts expect price spikes to become increasingly
commonplace as Britain depends more than ever on global energy
markets as its domestic reserves dwindle.
"The influence of global supply-and-demand dynamics is
expected to grow as the United Kingdom's gas import requirement
increases... price spikes will certainly remain a feature of the
UK gas market going forward in light of declining domestic
production," said Claudia Mahn at IHS Global Insight.
Britain's relative shortage of gas storage capacity, which
provides a buffer against supply shocks, compared with other
European countries will make domestic energy prices even more
exposed to global shifts in supply and demand.
"What is needed to counter volatility from supply shocks
like today's event is shorter term deliverability, e.g. from
fast cycle storage capacity," Olly Spinks, director at
consultancy Timera Energy said.
At the same time, net gas importer Italy lost supplies from
Libya for a third day on Monday, after militia clashes over the
weekend brought the North African country's Mellitah gas complex
to a halt.
Italy lost around 17.2 million cubic metres of gas supply
due to the outage in Libya, a country that provides 10-15
percent of Italy's gas, although production from the gas plant
resumed on Monday afternoon.
Current low demand in Italy and long term commitments from
Russia to provide gas left contracts trading in line with
Friday's levels, one broker said.
Short-term Brent crude prices traded at $110 per barrel on
Monday and were supported by the shutdown of the UK Brent oil
pipeline following a hydrocarbon leak in one of the legs of
TAQA's Cormorant Alpha platform.
The Buzzard oil field, the largest contributor to the
Forties crude blend, has also been producing below capacity due
to a technical problem and started a four-day maintenance
shutdown on Friday.
The Brent outage widened the backwardation in Brent futures,
with the front month finding strong support as opposed to later
months. The spread between April and May futures widened to over
$1 for the first time since early February.
Oil benchmarks are used to set prices of long-term gas
contracts around the world.
Britain's domestic oil and gas output has fallen around two
thirds since 2000, increasing the $2.5 trillion economy's
dependence on imports and its vulnerability to events outside of
(Additional reporting by Oleg Vukmanovic, Dmitry Zhdannikov and
Henning Gloystein; writing by Karolin Schaps; editing by Keiron
Henderson and James Jukwey)