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UK faces further gas imports, higher prices – Ofgem

20th February 2013

Energy watchdog boss says surge in gas imports inevitable to fill shortfall in power generation capacity

UK faces further gas imports, higher prices – Ofgem
Shale could potentially account for 10 per cent of the UK’s gas needs for the next century, according to estimates

The UK faces a surge in energy prices and imports due to a fall in its power production capacity, the Office of Gas and Electricity Market (Ofgem) chief executive Alistair Buchanan warned on Tuesday, as energy supplies are on a “roller-coaster” and heading “downhill fast”. Shale looms as one of the country’s hopes of maintaining energy sustainability.

Power station closures could rise up to 10 per cent by April this year, the energy watchdog predicts. To fill the gap, the country will need to increase its gas imports, Buchanan claims, which is a sour realisation for a country which will see coal stations closing at a time when coal prices are low and gas prices are higher.

The UK will need to import 50-80 per cent of its gas needs by 2020, The Oxford Institute for Energy Studies has told OGT. The country’s own gas supplies are expected to fall from around 43 billion cubic metres (bcm) per year in 2012 to around 16 bcm in 2030.

In reaction, Dr Simon Harrison from the UK’s Institution of Engineering and Technology (IET) said: “Gas is plentiful in the world, but the pipeline and/or liquefaction infrastructure do not exist to allow it to be freely transported from its source to the UK, meaning that while US gas prices are very low, gas is much more expensive in Europe including the UK.”

Another alarming indicator concerns the North Sea, a major energy hub for the UK which has increasingly struggled to fill the country’s supply gap. Oil and gas revenues from the resource rich region will plummet from USD 17bn in 2011 to approximately USD 7.7bn by 2015, according to estimates from the country’s Office for Budget and Responsibility (OBR).

With the shale gas revolution in the US increasing gas supplies and decreasing prices to an unprecedented level, some see replicating the unconventional boom in the UK as a viable alternative. The British Geological Survey will reportedly release new estimates as to how much unconventional reserves lie in the UK territory which will dwarf their previous predictions of 5 trillion cubic feet.

Shale could potentially account for 10 per cent of the UK’s gas needs for the next century, according to estimates. However, some analysts have put salt on the ability to reproduce the US’ shale revolution. “Our stance is that it is not likely that we will see anything similar to what is happening in North America anywhere else until the next decade,” Ryastad Energy partner Anders Hannevik told OGT.