UK CO2 users agree short-term price fix to keep gas flowing

INDUSTRIAL gas users in the UK have struck a short-term deal on the prices they pay for CO2 to keep the gas flowing until January and avert a shortage.

Last month, the UK Government was forced to pay for CF Industries to restart operations at its Billingham ammonia complex to maintain supplies of food-grade CO2 as warning of shortfalls threatened food production, where the gas is used to stun animals sent for slaughter and in packaging to extend the shelf-life of foods.

The Government-offered three weeks of financial support after a sharp rise in natural gas prices prompted CF Industries to declare production uncompetitive and shut down facilities that produce 60% of the UK’s food-grade CO2. On 1 October, Business Secretary Kwasi Kwarteng temporarily waived competition law to allow industrial buyers of CO2 to work together to agree this new pricing fixing agreement and shore up supplies.

How much is being paid is unknown, but CF Industries said in a statement yesterday that the agreements run to the end of January and “during this period, it is expected that the UK Government and industrial gas customers will develop robust alternative sources of CO2 as part of a long-term solution for meeting demand in the country.”

Ian Wright, CEO of the Food and Drink Federation, told the BBC that he welcomes the news, but added: "The increased cost of buying CO2 is yet another burden on the food and drink industry, which is already facing enormous stresses.

“This will, of course, add more pressure on prices for shoppers and diners."

Kwarteng said: “Today’s agreement means that critical industries can have confidence in their supplies of CO2 over the coming months without further taxpayer support.”

Kwarteng has been caught up in a public spat with the Treasury over plans to support heavy industry as energy-intensive users, including in the chemicals and steels sectors, wrestle with high energy prices.

Spokespeople from the business and treasury ministries have been briefing against one another in the press about whether formal discussions have been taking place over how taxpayers may support for industries. Downing Street has now stepped in with an official spokesperson saying: “As you would expect, ministers from BEIS are working across Government, including with Treasury, on this important issue, the challenges that are currently facing industry in light of global gas prices, and that will continue.”

Trade groups have warned that without support, wholesale natural gas prices, which have risen by 250% since the start of the year, could force closures of energy-intensive industries, including in the steel, paper and chemicals sectors.

The BBC has reported that it expects Kwarteng’s efforts to support business will be backed by Downing Street, and this could include loans to cover the costs of high energy prices.

CF Industries’ Billingham Complex produces 750 t/d of CO2. Its Ince complex in Chester remains offline and the company says it does not know when production will resume. Ensus has resumed production at its Wilton plant, which had been closed for maintenance. The Wilton plant can produce up to 40% of the UK’s CO2 requirements.