With possible gas shortages in the news while Ladbrokes offers odds of 4/6 on a white Easter this year, can UK infrastructure cope?
First, this blog entry is about the supply of gas - some news stories have conflated this issue with the need for more gas-fired power stations, which is separate, although it will increase demand for gas. To keep warm, we usually burn gas directly, not convert it into electricity.
We either use our own North Sea gas, get it via three pipelines from Norway, Belgium and the Netherlands, or by sea in tankers in liquefied form (liquefied natural gas, LNG). We also store gas for times of higher demand. When the Belgian pipeline failed on Friday, the price of gas jumped by 50%, before settling back down when the pipeline started working again. This demonstrated the vulnerability of the UK's gas supply and the need for resilience from having an adequate amount of gas storage. The current situation should not be overstated, though - National Grid has not issued any gas supply warnings yet, and it did so several times in 2010.
On the LNG front, Centrica has concluded a deal with an American shale gas company that will see imports from the US by 2018. The UK has five LNG terminals - two at Milford Haven in Wales, two in north Kent and one on Teesside, and there is no suggestion that these won't cope with the new shale gas deal, but it is of course some way off.
The UK has a lower gas storage capacity than other large European countries. According to the Gas Infrastructure Europe website, the UK has capacity of 3778 million cubic metres (mcm) available to third parties, whereas France has 12,700, Germany has 20,455 and Italy has 11,306. The UK capacity is almost entirely provided by one site: Centrica's Rough field off the Yorkshire coast. The picture is even starker when you consider how many days' storage the UK currently has compared with demand - 19, compared with 95 in France, 86 in Italy and 110 in Germany.
Gas pipeline reception facilities, LNG terminals and gas storage are all types of project that must be authorised via the Planning Act 2008 if they are large enough (generally, if they can supply 4.5 mcm of gas per day). There are no gas reception facilities or LNG terminals on the Planning Inspectorate's books as live or forthcoming applications, and only one gas storage project - Preesall in Lancashire, on which a decision is due by 22 April, but will take eight years to build. Not very promising so far, then.
The better news is that there are no fewer than 13 projects under development (from the GIE map) - apart from Preesall, all the others were applied for before the Planning Act regime came into force. I've done a quick check of their websites and many are woefully out of date: 'we will submit our planning application in January 2010'; 'we will submit our CPO application in October 2008'. The honourable exception is the Gateway project, which has a press release on Friday's gas price spike. It describes the Department for Energy and Climate Change (DECC) as acting like 'an ageing snail' on gas storage.
Click here to view table.
If all these came on stream, the current figure of 3778 mcm would jump to 22045, corresponding to 111 days' supply - problem solved, eventually. It seems that many of these projects have stalled, however, of which the failure to keep websites up to date is a symptom. The Telegraph article says that Centrica is not bringing its (presumably Baird) project on stream because 'it is not economic to build in current market conditions without some kind of financial incentive'.
So the bottom line is - the bottom line. The projects are there, but they must make financial sense too. On the other hand, DECC must make sure that they are getting a good deal if projects are to receive government contributions.