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North Sea gas leak prompts price spike

28th March 2012

Gas leak on 25 March prompts spike in trading prices and shutdown of nearby Shell operations.

North Sea gas platform evacuated after leak

Gas prices have risen on the back of a string of supply disruptions including the gas leak at Total's Elgin gas platform, Reuters reported on Tuesday.

The leak occurred on 25 March after a well operation at a wellhead platform on the Elgin gas field, located east of Aberdeen in the North Sea. The leak prompted rival energy giant, Shell, to evacuate and shut a nearby gas rig.

The benchmark summer 2012 gas contract saw strong gains as traders bet that supplies from Shell and Total production platforms would not return in the next few months, one trader from a major UK utility said. It rose 0.67 pence to 60 pence per therm, building its premium to prompt gas prices, which traded at around 56.5 pence, said Reuters.

Production on the Elgin is fully stopped and the leak remains ongoing. Total has said it may take six months to tackle the leak if it decides to drill a relief well.

The delay might force Shell to bring forward maintenance on its Shearwater gas platform - positioned four nautical miles from Elgin - with immediate effect due to concerns over drifting gas.

Shell's Ormen Lange gas field returned to full output late on Monday, North Sea infrastructure operator Gassco said on Tuesday, which is set to restore a key gas supply route to Europe, including the UK.

However, Norwegian gas deliveries to the UK were cut by some 37m cubic metres per day (mcm/day), and flows had not yet recovered to pre-outage levels of about 60 mcm/day.

Total launched internal emergency procedures and mobilised Crisis Management Teams in Aberdeen and Paris. Some 238 personnel were evacuated onshore, and no injuries have yet been reported.

“All necessary measures are being taken to respond appropriately to the situation and to minimise its impact”, said Total on 27 March.  Investigations are ongoing to analyse the causes and to determine how to stop the gas leak.

A surveillance aircraft flown over the area confirmed a sheen on the water in the area of the platform. This sheen is related to drilling muds and/or light condensate associated to the gas representing a volume estimated today at about 30 m3, said Total.

Preliminary assessments indicate no significant impact to the environment and dispersants are not considered necessary at this stage. Oil Spill Response Limited (OSRL) has been alerted and is currently evaluating the situation.

Total’s UK-based affiliate Total E&P UK Limited is working with relevant authorities including the Department of Energy and Climate Change (DECC), the Health and Safety Executive (HSE) and the Scottish Environmental Protection Agency (SEPA).

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