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Gas deficit warning issued by National Grid as UK struggles to stay warm

UK factories could be forced to stop production amid fears the country has only enough gas to ensure household supplies in the current freezing weather.

The alarm was raised by National Grid (LSE: NG.L - news) when it issued a "gas deficit warning" early on Thursday amid high demand to keep homes and businesses warm as strong winds from Siberia continue to sweep blizzard conditions across the country.

The icy blast has been made worse by the arrival of Storm Emma, with boiler servicing engineers reporting high demand for breakdown repairs.

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National Grid said there was a shortfall of around 50 million cubic metres of gas and it could limit use in non-essential industry later in the day and into Friday unless further supplies could be secured.

The requirement is aimed at keeping home boilers burning and maintaining gas-generated electricity.

The response from industry included an announcement from chemicals giant Ineos that it had agreed to cut natural gas consumption at its site in Runcorn by a fifth.

The site, which is responsible for chlorine used in drinking water, will continue to operate using power from its own waste plant.

National Grid said: "National gas demand today is high and due to the extreme weather conditions, there have been gas supply losses overnight.

"At 5.45am this morning we issued a 'Gas Deficit Warning' to the market.

"This is an indication to the market that we'd like more gas to be made available to ensure the safe and reliable operation of the national gas network.

"We are in communication with industry partners and are closely monitoring the situation."

The company later said the market was responding to its request and it was seeing an increase in gas supplies.

It made clear that it had not instructed industry to use less gas, adding: "Any large users of gas that have reduced their demand will have done so under commercial arrangements with their gas supplier."

The Government urged people to continue using their gas to heat and cook.

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Energy minister Claire Perry said: "The National Grid is following a standard procedure and people's domestic supplies won't be affected.

"I have spoken to National Grid this morning and we are in constant contact to monitor the gas supply throughout this extreme weather. So do carrying on using your gas heating and cooking meals as normal."

The energy operator's warning was made 24 hours after Sky News reported a doubling in the cost of wholesale gas for immediate delivery on Wednesday morning.

Experts pointed to a series of factors, including the weather, for prices reaching 12-year highs of 190p per therm.

The main one was the growing reliance the UK has on gas pipelines from overseas as storage dwindles - making wholesale costs more prone to market developments.

Centrica (Frankfurt: A0DK6K - news) , the owner of British Gas, closed the country's largest storage facility off the Yorkshire coast last year on safety grounds.

Supply issues this week, including an outage at a gas processing plant in Norway, have combined with technical problems at some UK gas terminals to knock imports.

After the National Grid alert, the cost spiked at 200p per therm and prompted warnings that homes and businesses potentially faced higher bills to account for the crunch.

Dr Jonathan Marshall, energy analyst at the Energy and Climate Intelligence Unit, said: "Behind today's gas deficit warning is a 'perfect storm' of unrelated short-term issues - freezing conditions, diminished Dutch gas production due to earthquake concerns, weather-related issues curbing imports from Europe, and a global LNG (liquified natural gas) market in which supplies are being pulled to Asia by higher prices.

"But underlying it is another set of issues that speak to a failure by successive Governments to map out a secure gas future in the way that they have done so successfully for electricity.

"Allowing Centrica to close the UK's only big long-term gas store without consideration for supply during cold snaps, failing to develop a coherent plan for low-carbon heating, and above all a head-in-the-sand approach to improving energy efficiency in homes have all put households and businesses at risk of shortages and price spikes."