Higher bills likely as LNG heads to Asia The completion of Japan's nuclear shutdown raises the threat of higher winter gas prices and bigger energy bills for UK consumers as cargoes of liquefied natural gas are diverted to Asia. UK imports of LNG have plummeted 30 per cent this year as prices have climbed, showing the effect of last year's Fukushima disaster and the subsequent closure of Japan's nuclear reactors, the last of which was switched off on Saturday. Japan has plugged the energy gap by switching to gas, leading to a surge in demand for LNG. Dozens of LNG cargoes that were originally destined for EU countries have been sent instead to Japan, enticed there by higher spot prices for gas. That has increased the risk of gas shortages in Europe. The drop in imports shows how the UK is losing out in the competition for energy supplies to fast-growing economies in Asia and South America - a problem that could get more acute as Britain's own indigenous gas production declines and its reliance on imports grows. The fall in LNG imports "is going to be fundamentally supportive of gas prices for the remainder of 2012 and going into 2013," said Andrew Horstead of Utilyx, the price risk management firm. Britain bears the brunt of any disruption in the LNG market because it has fewer long-term LNG supply deals than others in the EU. The flexibility built into its contracts means suppliers can easily divert tankers bound for the UK to the highest international bidder, on penalty of a relatively small fine. Between August 2011 and last month, imports of LNG fell 29.5 per cent compared with the same period in 2010-11, from 66m cubic metres a day on average to 46.5mcm/d, according to The Energy Contract Company, a consultancy. Analysts said the drop reflected lower gas demand due to the recession and a relatively mild winter. But the effect of higher Asian prices was identified as the overriding factor. Sabine Schels, a commodities strategist at Bank of America Merrill Lynch, predicted that Britain's main LNG supplier Qatar would continue to reduce LNG exports to the UK in the coming months and it was "not inconceivable" that they would fall to zero by the end of the year. The trend was confirmed by BG Group, one of the world's largest LNG traders, which revealed last week that it did not import a single cargo of LNG into the UK in the first quarter of 2012, compared with eight a year earlier. The company has said that of the 53 cargoes it delivered in the quarter, 34 went to Asia, 12 to South America and two to Europe. "One of the reasons gas prices were high last summer and why they've stayed high is that the LNG we were expecting hasn't turned up," said Niall Trimble, managing director of Energy Contract. Analysts said UK gas prices will have to increase to stem the diversion of supplies to Asia, and to entice more pipeline gas from Europe. Much European gas is indexed to the price of oil, and is more expensive than gas traded in the liberalised UK market. Ms Schels said UK winter gas prices, at present 70.5p a therm, would have to increase to 90p a therm to attract the necessary supplies. Compounding the challenge for the UK energy balance is the sharp fall in domestic production of gas, as North Sea reserves dwindle. UK gas output has been falling 6-7 per cent a year on average since 2000, and plunged by 20.8 per cent last year. As indigenous production drops, imports of LNG have increased: last year they accounted for about 30 per cent of total UK supplies - up from 2 per cent in 2008. With LNG looming larger in Britain's energy supply, its dependence on a small circle of exporters - such as Qatar - has grown. According to Energy Contract, "by the middle part of this decade, four very large companies should be supplying close to 40 per cent of all our gas."