Will the UK run out of gas in February 2011?

We won't "run out", but we could well have shortages. Here's why...

First, it's important to understand the overall picture. The UK had been a gas exporter from the mid-nineties until a few years ago, but now production from the North Sea has been plummeting for over five years, we're a significant importer. The graph below illustrates this - when the blue line is above the yellow, we were a net exporter, when it is below, we were a net importer. Click it for a larger version.


Gas supply in the UK comes from several sources at present:

• Production from the North Sea
• Imports from Norway via the Langeled pipeline
• The Interconnector, bringing gas from Zeebrugge in Belgium to Bacton in England. This can also export gas from the UK back to Belgium.
• The BBL pipeline, which brings gas from the Netherlands to Bacton in England.
• Liquefied Natural Gas (LNG) imports, through a range of terminals.
• Storage facilities in the UK, which are generally filled in the summer and drawn from in the winter.

Each of these sources of gas has key strengths and weaknesses, such as:

• North Sea production is a secure supply, but meets less than half of peak winter gas demand in the UK. As with any supply, it is susceptible to accidents and malfunctions, such as this one in 2007.
• The Langeled pipeline can supply about 70 mcm (million cubic metres) a day at maximum rate, or about 15% of the UK peak demand during December 2010. Without this supply, the UK would not have enough gas, and its failure for a period in January 2010 caused the National Grid to issue several Gas Balancing Alerts and resulted in a surge in prices. At present, it is operating with no problems.
• The Interconnector and BBL pipeline are vital when we need extra gas, but to get it the UK has to pay a price determined by supply and demand in the rest of Europe. The BBL can supply up to 45 mcm/day, while the Interconnector can supply up to 58 mcm/day. When supply problems occur in Europe, as they have in the past due to disagreements between Russia and Ukraine, then the availability of gas imports is reduced. There is also the risk of malfunctions, such as the fire in 2008.
• LNG imports to the UK started quite recently, as the decline of North Sea production made them necessary. As with other imports, they are susceptible to malfunctions and also lack of supply if the market is short of gas. The peak supply during December 2010 has been a bit over 100 mcm/day.
• Finally, storage has been supplying about 10 to 15% of UK gas demand in December 2010. It can supply more, but only for a short period of time, as supplies will deplete quickly. Storage is split into long, medium and short range stores. The former are large in volume, while the latter are small and only for use during exceptionally high demand. There are two risks for storage. The first is technical faults, which have happened in Feb 2006 and Nov 2010. These are serious enough that even small glitches can push prices up, such as in early Dec 2010. The second risk is that the storage simply does not have enough gas in it - this is what will now be examined in more detail.

Current state of UK gas storage

You can view the current amount of gas in storage, and various other bits of technical info, on a website run by the National Grid. Click the help link on that page for more info.

However, what's more interesting is to be able to look at the levels of gas storage this winter so far, and compare them to a year ago. It's quite a bit of work to get the data for this and make some charts, so I've done it for you. The following charts show long, medium and short range storage levels from October through to September, with the red line representing this winter, and the blue line winter 2009-10. Again, click for larger versions.






There are several things to note from these graphs:

• At the end of winter, around March 2010, gas storage was at a low level.
• All three classes of storage started off a a lower level in October 2010 than in October 2009, indicating that insufficient gas was injected over the summer to make up for the previous cold winter.
• In late December 2010, storage is well below the levels seen a year ago.

At present (late December 2010), gas storage is about 52% full, while a year ago it was about 85% full. If the remainder of the 2010-11 winter remains cold, or even just colder than average, then gas storage could well be completely depleted before winter ends.

If withdrawals from storage continue at the average rate for December 2010 so far, there are only 45 days of stocks remaining.

So what will happen when stocks get low?

Supply to domestic customers will be guaranteed if at all possible, as the industry and government can not afford to have many thousands of people without heating in the winter, not to mention the technical difficulties with shutting off large areas of the gas network. The procedure that is followed is detailed on government and National Grid websites, such as this presentation.

The stages are:

• Gas Balancing Alert, to encourage extra supply and reduced demand through normal operation of the gas market. We've already had these on two days during December 2010, simply due to cold weather resulting in high gas demand.
• Stage 1 (potential emergency): Relax the specification on energy content of gas in the network, maximise use of gas under pressure within national pipelines (linepack), instruct customers on interruptible gas supply contracts to stop using gas. Public appeals to reduce gas use may be used.
• Stage 2 (Declaration of emergency): all suppliers are instructed to maximise supplies, and storage will maximise output until levels fall to a predetermined point. Normal gas market operations are suspended. Public appeals to reduce gas use may be used.
• Stage 3 (Firm load shedding): organisations (with some exceptions, e.g. hospitals) are instructed to reduce gas use. If voluntary reduction is not enough, gas supplies will be physically cut off, starting with the largest users. Public appeals to reduce gas use may be used.
• Stage 4 (System isolation): parts of the gas network will be isolated, resulting in no gas supply to any user in the affected areas.
• Stage 5: supplies are resumed when the emergency is over.

Let's hope it doesn't come to that. But be aware that the risk grows as long as the weather stays cold, and that any accident or malfunction in gas supplies could tip the system over the edge quite quickly, especially later in the winter.

Electricity

One final point - about 40% of our electricity in the UK is generated by burning gas, and these power stations could have their supply cut in an emergency. While other sources, such as coal and oil fired stations would be brought to maximum output, there could still be a shortfall, so a gas supply emergency implies an electricity shortage as well.

Links

Here are links to where I got the data from for the charts above, and where you can read more:

• National Grid: Prevailing View, with current status of the gas system.
• National Grid: Data Item Explorer, for historical data on all elements of the gas supply system. 
• National Grid: Entry Zone Graphs, with live views of the past 10 minutes, 60 minutes or 24 hours of gas supply.
• National Grid: Real-time electricity data.
• DECC: Government energy statistics on gas.

I'll probably do an update in a few weeks, when the effect of the weather has become clearer. In the meantime, consider what you might do in a gas supply emergency, and make appropriate preparations.

Mike

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UK's first Gas Balancing Alert for 2010/11

I just blogged on this for the Ashden Awards. I've been expecting an alert from the National Grid for some weeks, and now it's here. I expect some more alerts this winter, and if it stays cold we could be in for some real problems...

Mike

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Peak Oil Taskforce warns on impact of BP oil spill

The UK-based Peak Oil Taskforce, which includes Virgin, Arup, B&Q, Kingfisher, Solarcentury, Buro Happold, Scottish and Southren and Stagecoach, has just published a briefing note on what the BP oil spill at the Macondo well means for global oil production and for the UK.

The output of this well would have been minuscule compared to global oil demand, despite the havoc it wreaked in the Gulf of Mexico. However, the knock-on effect is that the increased regulation and safety procedures for deep-water oil production will slow down development of future deep-water oil fields. These changes are clearly needed to improve safety, but an unintended result is that oil supplies will not grow as much as previously forecast in the coming years. The report sums it up:

The Taskforce sees very major consequences of rising oil prices in the next few years. Without a strong and coordinated response from Government to protect the UK economy and society from rising prices, we will see the cost of travel, food, heating and retail goods rise which will impact British businesses and citizens alike. We also need to see much quicker action from Government to support the introduction of renewable energy technology and energy efficiency measures.

The Taskforce would like to work with the Government to develop a contingency plan that both addresses the risks of Peak Oil and speeds up our transition to a low-carbon economy.

Mike

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IEA World Energy Outlook 2010

This week the IEA published its World Energy Outlook for 2010.  The most interesting sentence is probably “Crude oil output reaches an undulating plateau of around 68-69 mb/d, by 2020, but never regains its all-time peak of 70mb/d reached in 2006.” So, they're basically admitting that peak oil has come and gone, at least for conventional oil.

Of course, there is still growing supply from unconventional sources, but the net energy, or EROEI, of these sources is lower, so it won't be long before we pass the peak of all energy supplies, if we haven't already.

You can read some critical analysis of the WEO2010 at The Oil Drum and ODAC.

Mike

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North Sea cavern could double UK gas stockpiles

According to a story in the Telegraph, the Italian oil company Eni has been given permission to develop a gas storage facility in the North Sea. At about 4.6 billion cubic metres, it will roughly double the UK's gas storage capacity.

This is exactly the kind of thing we need as the North Sea gas output continues to plummet year after year, but it's worth bearing in mind that:

• Eni might not be in a hurry to develop it, given the economic situation.
• If it goes ahead, it still won't be ready until 2015, by which time our indigenous gas production will have fallen another 20% or so.
• If it goes ahead, we still have to import the gas, which assumes that there is enough available in the market, and that we can afford it.
• If it goes ahead, it will still only give us 20 days supply of peak winter demand.

So, what we really need to be doing is insulating our homes, turning down the thermostats and switching to non-fossil-fuel forms of heat. This is what I've done in my own house, installing cavity wall insulation, loft insulation, a woodburner and solar water heating.

Mike

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Liberal Democrat Conference: 'Oil price could double in return to 1970s style shocks'

The Telegraph reports:

Energy secretary Chris Huhne has ordered his officials to look at the impact of a 1970s-style oil price spike on the British economy. Mr Huhne said the UK was having to prepare itself for “lots of shocks”, forcing the price of a barrel of oil to double, mirroring the volatility last seen in the 1970s.
...

A 1970s-style doubling in the price of oil would drain £45billion from the UK economy in two years, hitting investment and jobs. He told a meeting on the fringe of the party’s conference in Liverpool: “We will have a world where there may be lots of shocks, we may well have oil price rises which are similar to the ones that we had in the 1970s, a doubling. I have asked for some work to be done in the department about what the impact of that might be in terms of British business, businesses that have nothing to do with energy, with green growth, entirely outside."

Could it be that the UK government has finally woken up and realised there's a problem with oil supply?

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An Inconvenient Truth about OPEC

An interesting article over on Project Syndicate, here's a few paragraphs:

In forecasts that carry forward to the 2030’s, the three organizations [IEA, EIA and OPEC] share the view that world energy demand will increase, that developing countries will account for most of the increase, and that fossil fuel will remain dominant. They also agree that dependence on oil from OPEC members will increase as non-OPEC oil resources dwindle and become more expensive to extract. But a major flaw in modeling world oil markets makes these forecasts as unrealistic as a projection that humans will land on Mars tomorrow.
...
It is nearly impossible for OPEC members to produce the difference between estimated world demand and non-OPEC supply. For example, in its recent forecast, the EIA’s base-case scenario is that, by 2035, OPEC will add about 11 million barrels of oil a day (mb/d) to its 2010 output. Is this possible when production is declining at a rate of at least 3%?
...
Indeed, given the expected growth in energy demand in the next two decades, and the possible – even likely – shortfall in OPEC supply relative to the projected “call on OPEC,” the term “alternative energy” will lose its meaning. The only “alternative” to harnessing all feasible energy sources will be a slow-growth world of permanent shortages and increasing misery.

Mike

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