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20 Jul

What Is A Gas Shipper?

by D-ENERGi
 

The difference between a gas shipper and gas supplier 

The difference between a gas shipper and a gas supplier is that a gas shipper helps to manage the logistics of gas on the national transmission system (NTS). This is the UK’s network of gas pipelines, supplying gas to power stations and industrial users and to gas distribution companies that supply gas to both domestic and business customers. The NTS covers the entirety of Great Britain, including Scotland and Wales. 

Meanwhile, a gas supplier sells gas to the end customer, either a business or domestic user of gas. The role of the shipper involves arranging the physical transportation of gas to that consumer, involving booking entry and exit capacity, as well as managing imbalances. 

Gas shipper licenses 

In order for a gas shipper to operate, they must obtain a gas shipper license under the Gas Act 1986, unless there is an exemption that applies. With this license, gas shippers can buy gas from those who extract it from the ground in one of four ways. Including under a long-term agreement, by buying gas on a spot market, through “over the counter” physically delivered futures contracts, or by buying gas through exchange-traded physically delivered futures contracts. 

The impact gas shippers have on gas suppliers 

With the loss of many gas suppliers in recent months, it is important to consider what impact gas shippers have on gas suppliers and whether this can be used to explain the failure of so many suppliers. 

When a gas shipper exits the market like CNG did in the winter of 2021, gas suppliers could face going out of business. Gas shippers, CNG, were providing gas to 18 utility companies, but stopping their deliveries and operations, caused fear throughout the industry for the supply chain. Many now feel concerned about the “domino effect” this type of move from a large gas shipper can have on gas suppliers and the impact this would later have on gas prices. Since the exit from CNG, the remaining 18 utility clients they had were told to find a new supplier and “quickly”. After many of their customers had already suffered as a result of rising gas prices earlier in the year (2021), the company was put into this difficult position, leaving the UK gas market in a complicated situation. 

Just as this example demonstrates, the role a gas shipper plays does not just involve the movement of gas but can play a huge part in other aspects of the market. Any shift or change from a gas shipper is likely to result in huge effects on the gas market.