Former UK Energy Minister Warns Gas Supply Is Sheer Luck

Published at 01:53PM - 08/01/15

The former energy minister, Charles Hendry, has warned that the UK government is currently relying on sheer luck to ensure the country’s gas supply, and he called on ministers to safeguard energy security of supply for the nation by constructing new and adequate facilities for gas storage.

He said that the North Sea’s fields would see even faster declines due to the tumbling price of both gas and oil, which would dampen fracking investment for new shale operations. In turn, this would increase Britain’s dependence on imported gas far sooner than originally estimated.

Charles Hendry was energy minister until 2012 and a Conservative MP. In 2013, a fellow Conservative minister, Michael Fallon, said that no intervention was planned to increase natural gas storage facilities for the nation, despite research commissioned by the government that demonstrated such a move could potentially save customers £1 billion.

Current long-term gas storage facilities allow the UK to hold just fifteen days of gas supply. This compares to other European storage facilities, which are designed to hold around one hundred days’ worth. The Conservative Party pledged to address the shortfall situation in opposition as a means of boost national security.

Mr Hendry wrote of his concerns in the Daily Telegraph this week and pointed out that over the past nine years the UK’s gas reserves dropped to worryingly low levels on four occasions. One such occasion was in 2013, when the prolonged bout of cold weather meant that the country was ‘within hours’ of being without a gas supply.

The subsequent gas supply, he wrote, was only supported because of luck. Energy policies, however, he said, needed to be predicated on more than simple luck and required a strong strategy to safeguard the country’s energy security of supply.

Prices of gas across Europe have also remained depressed for much of the previous year, after consumption patterns dropped in response to a mild winter. This meant that the government was less inclined to focus on plans to push forward new domestic supply via the country’s shale gas industry. Investment would be difficult to secure at current prices.

Commercial viability is a big factor. Despite the country’s low capacity for gas storage, necessary investment in sizeable new facilities is yet to prove a commercially viable option. Advocates of increased gas storage have pressed the government for subsidy support or for obligations to be imposed on suppliers to ensure new builds. They argue that the moves would protect consumers from supply cut-offs or spiking prices in any crisis situation.

The UK now has one major existing site for gas storage. The Rough field asset, however, is ageing, and plans for investment of a further £2 billion have been scrapped.

The British Ceramic Confederation supported Mr Hendry’s comments, with CEO Laura Cohen pointing to the association’s members who are all significant consumers of gas. She said that lack of storage facilities was pushing investment away from the country, as financiers feared the risk of price volatility in a situation of supply uncertainty.

A spokesperson from the DECC said that the UK already had ‘resilient’ infrastructure for storage and supplies of gas and that the government had delivered infrastructure investments of £45 billion since 2010.