A TEESSIDE company with a big part to play in the UK’s green industrial future says its international competitiveness continues to be undermined by planned new charges for its use of the national gas pipeline system.

CF Fertilisers at Billingham is one of a number of gas-intensive chemical and energy companies on Teesside using only a few miles of Britain’s 4,760-mile National Transmission System (NTS). The gas they rely on in their processes comes ashore at Seal Sands.

The company was one of several backing a letter to Kwasi Kwarteng, the Secretary of State for Business, Energy and Industrial Strategy last October following the energy regulator Ofgem’s initial decision to scrap a discount known as the “shorthaul tariff.”

The tariff, applicable to gas-consuming UK businesses using the NTS closest to the UK points of entry from the North Sea, had been in place for more than 20 years.

CF says Ofgem’s decision to scrap the charge from last October led to an immediate eight-fold increase in its gas costs - amounting to millions of pounds a year - putting it and other companies on Teesside at a significant commercial disadvantage to their European and global rivals.

Now, following consultation and an assessment, Ofgem has announced a replacement for the tariff, which will come into force from October this year. However, CF says the discount being offered by Ofgem still represents a six-fold rise compared to the pre-October 2020 charge.

Brett Nightingale, Managing Director of CF Fertilisers, said: "We are disappointed with Ofgem’s decision. We believe the alternative continues to put a disproportionately high burden of cost on those industries like CF Fertilisers who use very little of the national network and are fundamental to the green industrial revolution, our net zero ambitions and the hydrogen economy.

"The additional costs we and other businesses now face undermine our competitiveness. We intend to work with other Teesside industrial gas users to re-evaluate our options, one of which would be to move away from the National Grid to avoid the significant increase in our network costs."

One of the options available to CF and others on Teesside would be to develop their own private pipeline connection to the gas supply - something they would prefer not to do and which would also incur substantial cost.

In an appeal to Mr Kwarteng on behalf of Teesside industry last year, North East Process Industry Cluster (NEPIC) Chief Executive Philip Aldridge also warned it could also have the opposite effect to that which Ofgem intended - resulting in a £100 million loss (from major gas consumers) for maintenance and investment in the national grid network. That shortfall would ultimately need to be recovered from the public and the other gas network users via their bills.

Mr Aldridge wrote that the introduction of a “postage stamp” mechanism for charging all major users “would be extremely damaging for both business and the region.”

CF, which employs around 600 people at plants on Teesside and in Cheshire, currently has a 40 per cent of the share of the UK fertiliser market, supplying to more than 15,000 UK farms.

The carbon footprint of the company has reduced by 40 per cent over the last ten years and CF is also a partner in Net Zero Teesside and a similar initiative in the North West. The carbon capture projects could hold the key to the further significant decarbonisation of industrial processes in both regions.

CF could also be instrumental in the safe storage of hydrogen - seen as one of the green fuels of the future. The low carbon gas has the potential to be used in the domestic heating systems of 23 million UK homes and in transport (shipping and HGVs) but is notoriously difficult to store. However it can be safely stored within ammonia (NH3) which is one of the constituent chemicals in CF’s fertiliser.