THE eight-year-old gas pipeline between Britain and Belgium emerges in the coastal town of Zeebrugge where, with barbed wire the only obvious sign of security, it is housed in a line of sheds and manned by a handful of staff.

It is an unlikely lifeline, but the UK and Ireland are becoming increasingly dependent on it.

The interconnector was originally built to send gas from Britain’s North Sea fields to the gas-guzzling German market. But as supplies of Britain’s North Sea gas start to wane, it is beginning to flow the other way.

Britain, so long a net gas exporter, has become a net importer. It consumes 113 billion cubic metres (bcm) a year, for both domestic and industrial use. About 64% comes from the North Sea and Irish Sea, and 9.4% through the interconnector, according to Ofgem, the energy regulator. Gas can also be drawn from Britain’s gas-storage sites or shipped in from overseas in liquified form.

The UK government estimates that about 90% of Britain’s gas comes from domestic sources and the rest is imported. Our reliance on gas imports will rise sharply after next year.

About 80% of Ireland’s gas needs, in turn, are imported through two interconnectors from Scotland.

Imports through the interconnector between Belgium and Britain and the new liquified natural gas (LNG) terminal on the Isle of Grain in Kent have been well under capacity despite soaring demand this winter. The former has the potential to deliver 16.5 bcm and the latter 4.5 bcm.

British consumers have seen their gas and electricity bills soar, while industry has warned that it could face shutdowns due to lack of gas.

Ofgem has launched an inquiry into why the interconnector was not operating at full throttle despite strong demand from Britain. The pipeline, in which BG Group, Eni, Eon and Gazprom all have shareholdings, is sometimes only half full, said Ofgem.

The European Commission has found the shortages in Britain were made worse by failings in the operation of European gas markets. Ofgem believes some European energy firms are storing gas rather than selling it to Britain. The regulator said that when the wholesale price came down after the recent cold snap ended, the pipeline was operating at 90% of capacity; at the height of the cold spell it was only half full.

Ofgem said that the “erratic” supplies and “low flows” through the pipeline meant Britain had paid £1 billion more than it needed to for gas on the wholesale market this winter. Next winter, the overpayment could reach £3 billion if Britain continues to pay a premium.

While Irish households have already had to stomach a 25% surge in Bord Gais’s gas prices late last year, it is likely that gas bills will take another huge jump when the Commission for Energy Regulation (CER) carries out its next annual price review in September.

At the heart of the shortage is Europe’s insatiable appetite for natural gas, the cleanest-burning and most energy- efficient of the fossil fuels. Since 1990, European consumption of natural gas has risen by 60%, according to Suez, the fourth-biggest European utility and energy group. It forecast that demand for gas will rise by a further 40% between 2000 and 2015, and said an extra 1,500 gas-fired power stations would be needed — at a cost of €650 billion.

The biggest natural-gas reserves are not located in energy-hungry western Europe but in the former Soviet Union and the Middle East. Europe has to import 40% of its gas, either in LNG shipments or through pipelines. By 2030, 70% of Europe’s gas will be imported.

Companies can buy gas in advance through contracts that lock them into the purchase price, but hedge them against future gas-price spikes.

Despite warnings that this winter would be particularly cold, British companies did not buy gas ahead of time, leaving them exposed to the wholesale spot price, which has more than doubled in a year.

Moves to improve supply are under way. Three more LNG terminals could eventually be built, including one at Canvey Island, Essex. Two existing terminals at Milford Haven in Wales are set for expansion. A new pipeline between Bacton in Norfolk and Balgzand in the Netherlands is under construction. Another pipeline, the 25bcm Langeland pipeline linking the Ormen Lange Norwegian gas field with Britain, will open by the end of 2007. The capacity of the Belgian interconnector has already been doubled to 16.5bcm.

The European commission is set to come down hard on any companies that distort supply by blocking competition. It could even fine them 10% of global turnover.

Gerard Mestrallet of Suez believes Europe needs a common energy policy if it is to have secure supplies. He said the markets alone would not come up with a solution. The prospect of a Europewide blueprint is set to be discussed in March.

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