UK Gas Security: Current Status and Future Issues, Mike Bradshaw, Warwick University

Warwick Business School

Professor Mike Bradshaw


The Geopoli*cal Economy of Global Gas Security and Governance: Implica*ons for the UK

1)  A two-‐year research project funded by the UKERC, end date 31st December 2013 (extended to end of March 2014).

2)  Involves a team of researchers: �  Mike Bradshaw, Warwick Business School �  Gavin Bridge, Durham University �  Stefan Bouzarvoski, University of Manchester Project research assistant: Joseph DuUon Consultants: Jim Watson UKERC/Sussex and the Gas Programme at the Oxford InsXtute for Energy Studies


Why a Supply Chain Approach to Gas Security? �  Provides a necessary anXdote to the current failings of

the literature on the geopoliXcs of energy security vis-‐à-‐vis natural gas.

�  Provides a framework for analysis of the different dimensions of gas security.

�  Provides a framework for idenXfying the actors, relaXonships and networks that influence global gas security.

�  Provides a basis for examining the interacXons between global trends and regional (EU) and naXonal (UK) energy policies.


Exploration

Production

Processing

Storage

Transport-ation

Storage

Distribution

End-use

Natural gas reserve base (Conventional/Unconventional)

Oil reserve base w/associated gas

Oil

Gas

Pipeline – Transportation-LNG-ship

Storage - LNG

Local pipe-grid-Distribution-LNG regasification/distribution

To pipeline specification

To LNG

To oil chain

Ethane, propane, butane

Residential & Commercial

Electricity generation

Industrial end-use

Transportation; natural gas,

LNG

Upstream

Midstream

Downstream

The Natural Gas Supply Chain

Source: based on IGU (2010) Natural Gas Unlocking the Low Carbon Future. Oslo: IGU, p. 12.


A Supply Chain Approach to Gas Security Geopoli*cs Dimensions Issues

UPSTR

EAM

Security

of Supply

•  Resource Base

•  Investment

•  Technology

•  Nature of proven reserves •  Access to reserves for investors •  Access to investment to develop proven

reserves •  Availability with exisXng technology and

prevailing price •  Technical reliability of producXon

MIDSTRE

AM

Security

of Transport (Transit)

•  Processing

•  TransportaXon •  Storage

•  Processing of associated gases •  Pipeline network •  Compressor staXons •  LiquefacXon faciliXes •  LNG Shipping •  RegasificaXon faciliXes •  Interconnectors

DOWNSTRE

AM

Security of

Demand

•  Power •  Industrial use

•  DomesXc use •  Transport

•  Role of gas in the energy mix •  Price formaXon •  Price compeXXveness •  Contract structure •  Energy policy •  Carbon tax •  Carbon Capture & Storage


The Case of the UK

�  Growing Import dependence �  The Globalization of UK gas security �  Growing uncertainty �  A Supply Chain Approach to UK Gas

Security


Natural Gas Flowchart 2012 (TWh)

Source: DECC (2013) DUKES

Chart H.3: Natural gas flow chart 2012 (TWh)

Note: This flow chart is based on the data that appear in Table 4.1, excluding colliery methane.

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0.0

20.0

40.0

60.0

80.0

100.0

120.0

1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012

UK Natural Gas Produc*on and Consump*on: 1970-‐2012 (BCM)

ProducXon

ConsumpXon

Peak in 2000

Net importer from 2004

In 2012 Imports accounted for 47% of supply

Source: BP 2013


THE UK’S CONTEMPORARY GAS BALANCE VECTORS

1.   UK Continental Shelf 2.   Norwegian Continental

Shelf 3.   Interconnectors (IUK &

BBL) 4.   Liquefied Natural Gas 5.   Exports to Ireland 6.   Domestic gas storage 7.   Domestic

unconventional gas?

GAS

107

Map 4.2: The National Gas Transmission System 2010

Source: International Energy Agency and DECC

Clair

? *

* *


Source: DECC (2013)

26

Natural gas

UK trade in natural gas, 1980 to 2012

TWh

LNG Imports

Exports

Pipeline ImportsNet Imports

-200

-100

0

100200

300

400

500

600

2012200520001995199019851980

TWh1980 1990 2000 2010 2011 2012

Natural gas production 404.8 528.8 1,260.2 664.4 526.0 452.1Imports 116.3 79.8 26.0 589.5 584.4 547.3of whichLNG – – – 203.8 270.7 147.9Exports – – -146.3 -176.4 -183.7 -144.0Net imports(+) or exports(-) +116.3 +79.8 -120.3 +413.1 +400.7 +403.3

UK gas production peaked in 2000 and has since been declining. With declining production the UK has become increasingly reliant on gas imports to meet demand. Since 2000 net imports have steadily increased year on year, with the exception of 2011 which saw a 3 per cent decrease on the previous year’s level. The recent fall in imports can be attributed to the reduced gas demand from electricity generators.

Imports of Liquefied Natural Gas (LNG) through the two terminals at Milford Haven (South Hook and Dragon) and via the Isle of Grain remain substantial, but their shares of total imports have dropped from 46 per cent in 2011 to 27 per cent in 2012. Demand for LNG on the global market remains strong but the UK has a diverse pipeline infrastructure (from Norway, the Netherland and Belgium) and the proportion delivered through each route will depend on global market conditions.


Re-orientation of domestic gas flows

Source: NaXonal Grid 2013

2.5.1 Supply Overview National Grid’s UK Future Energy Scenarios publication examines the gas supply components behind the two scenarios – Slow Progression and Gone Green. Rather than replicate this information, the supply section of the 2013 Ten Year Statement contains the information related to Gas Transmission capability planning:

■ Charts showing annual and peak supplies for the two scenarios;

■ Chapter 3 also details some background on the historic changes of gas supply; including historical evidence on the winter variation between winter maximum and minimum;

We have highlighted in recent years how supply patterns on the NTS are changing and are anticipated to become more uncertain into the future. Figure 2.5A represents some of the changes we have seen in flows on the system from the mid 1990’s to today.

2.5Supply

Figure 2.5A

Gas Ten Year Statement November 2013

034


UK LNG Imports

LNG Facility Ownership Capacity 2012 %

Dragon LNG (Milford Haven)

BG Group: 50% Petronas: 50%

6bcm 1.2%

South Hook (Milford Haven)

Qatar Petroleum Intl.: 67.5% ExxonMobil: 24.15% Total: 8.35%

21bcm 73.4%

Isle of Grain (Essex)

NaXonal Grid (Sonatrach, GDF-‐Suez, Centrica, E.ON Ruhrgas, and Iberdrola)

20.3bcm 25.4%

Others Algeria, Egypt, Nigeria, Norway,

LNG = 46.8% Of UK Gas Imports in 2011 and 27.6% UK Gas Imports in 2012 0

500

1000

1500

2000

2500

3000

2005

2005

2005

2006

2006

2006

2007

2007

2007

2008

2008

2008

2009

2009

2009

2010

2010

2010

2011

2011

2011

2012

2012

2012

2013

Million cubic

metres

Qatar 98%

Others 2%


Na*onal Grid’s Annual Gas Demand Scenarios 2013

025

Our Slow Progression scenario has a fairly flat view of annual demand over the scenario period. There is a further decrease in demand from 2012 due to a slower economy. Total demand then remains broadly flat, until the mid 2020s when total demand starts to decrease predominantly due to the changes in power generation demand.

Figure 2.2A Annual Gas Demand Scenarios including history – Slow ProgressionSource: National Grid

Figure 2.2B Annual Gas Demand Scenarios including history – Gone GreenSource: National Grid

In the Gone Green scenario, there is a continual reduction in annual gas demand throughout the scenario period. This is due to a combined influence of further efficiency savings, a transition to alternative sources of energy in our Gone Green scenario, and power generation being maintained as marginal plant for electricity balancing and reserve.


026

13

025

Our Slow Progression scenario has a fairly flat view of annual demand over the scenario period. There is a further decrease in demand from 2012 due to a slower economy. Total demand then remains broadly flat, until the mid 2020s when total demand starts to decrease predominantly due to the changes in power generation demand.

Figure 2.2A Annual Gas Demand Scenarios including history – Slow ProgressionSource: National Grid

Figure 2.2B Annual Gas Demand Scenarios including history – Gone GreenSource: National Grid

In the Gone Green scenario, there is a continual reduction in annual gas demand throughout the scenario period. This is due to a combined influence of further efficiency savings, a transition to alternative sources of energy in our Gone Green scenario, and power generation being maintained as marginal plant for electricity balancing and reserve.


026

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-20% -10% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 110% 120%

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History Future

Exports Import Generic Continent LNG Norway Onshore UKCS Import Dependency

-20%

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History Future

Exports Import Generic Continent LNG Norway Onshore UKCS Import Dependency

Annual Gas Supply ‘Gone Green’

Annual Gas Supply ‘Slow Progression’

Source: National Grid 2013


A Supply Chain Approach to UK Gas Security Geopoli*cs Dimensions Issues

UPSTR

EAM

Security

of Supply

•  Resource Base

•  Technology

•  Investment

•  ProducXon from UKCS •  ProducXon from Norwegian CS •  ProducXon from Russia/N. Africa •  Upstream of LNG supply chain & access to

LNG cargoes •  DomesXc unconvenXonal gas producXon

(biogas & shale)

MIDSTRE

AM

Security of

Transport (Transit)

•  Processing •  TransportaXon •  Storage

•  LNG RegasificaXon faciliXes •  InterconnecXon (domesXc and external) •  Processing & storage •  Re-‐orientaXon of the NTS •  Role of NBP as a liquid market/hub

DOWNSTRE

AM

Security of

Demand

•  Power generaXon •  Industrial use

•  DomesXc use

•  Role of gas in UK energy strategy •  Price CompeXXveness •  Contract Structures •  Gas-‐to-‐Gas market/hub evoluXon •  Gas intermiUency •  Carbon floor price and ETS •  Carbon Capture & Storage


Globalizing UK Gas Security of Supply

•  Globalization of LNG post Fukushima •  Geopolitics of Eurasian Gas Supply •  The Future of Norwegian Gas Production •  The Consequences of the US Shale Gas Revolution •  Prospects for Shale Gas in the UK and Europe


Conclusions �  There is a tendency to focus on the issue of physical security of

supply—the UK has a diverse gas supply system—but it is increasingly exposed to risks in global gas markets and price security of supply is the more likely concern.

�  Most supply disrupXons have been technical failures in the upstream and midstream, but miXgaXon measures—interconnecXon and storage—can reduce these risks, but who pays?

�  The greatest source of insecurity and uncertainty relates to ‘security of demand’ and this is impacXng on investment in the power generaXon sector.

�  How much gas, for how long requires an whole systems approach.


[email protected]

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UK Gas Security: Current Status and Future Issues, Mike Bradshaw, Warwick University

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Transcript of UK Gas Security: Current Status and Future Issues, Mike Bradshaw, Warwick University