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Imports to supply 90% of UK gas if investment is not made

UK gas dependency will soar without shale investment, says a new report

Imports will have to supply over 90% of the UK’s gas by 2035 if the country fails to invest in domestic reserves, such as shale, says a new report.

The UK’s National Grid – the country’s power transmission operator – has outlined four potential outlooks for UK energy supply and demand from now until 2050. In it’s No Progression scenario the report said that if the UK didn’t invest in developing its indigenous gas reserves it would need to import 71 billion cubic metres per year (cm/y) by 2035, leaving imports meeting 91% of consumption. More than 60% of this (43bn cm) would be made up of either piped gas from continental Europe or imported liquefied natural gas (LNG).

However in the Low Carbon Life scenario, which assumes economic prosperity and regulatory certainty, the UK’s gas import dependency could be just 40%. Indigenous shale gas production would provide over a third of UK gas supplies by the 2030s. In all scenarios UK shale gas production outlooks range hugely, from zero in No Progression to 32bn cm/y by 2030 in Low Carbon Life. National Grid said that in the same scenario shale gas production could make up 41% of total gas supply by 2035. 

National Grid said it was bearish on prospects for the UK’s coal-bed methane (CBM) output because of “fairly limited interest” over past year. It expects CBM to make up around 1bn cm/y of total supply by 2035. The report said the huge variations in projections for shale gas production and import dependency are because of a lack of data on the UK’s shale gas reserves. Only drilling more wells would provide adequate data. 

Recent studies by the British Geological Survey (BGS) suggest there could be up to 68.4 trillion cm of shale gas across northern England's Bowland Basin and the Midland Valley in Scotland. BGS data also show that southern England’s Weald basin could hold almost 9bn barrels of shale oil which, if proved, would triple the country's crude reserves. The National Grid report does not include an outlook for shale oil production.

The UK government is trying to lure shale gas developers by offering tax breaks and reforming trespass laws. The government’s Infrastructure Bill, outlined by the Queen in June, aims to encourage development of the UK's domestic energy reserves, such as shale and its North Sea resources, by clarifying and streamlining the underground access regime. The bill outlined plans for onshore oil, gas and geothermal producers to be able to drill under privately owned land without first seeking consent of the landowner.

In all of National Grid’s scenarios it expects UK Continental Shelf (UKCS) production to have a brief renaissance up to 2020, peaking in 2017. It would comprise around 38% of total UK gas supply in No Progression and around 46% of the total in the Gone Green and Low Carbon Life scenarios.

After 2020 National Grid expects Norwegian gas to provide the mainstay of supply to the UK market while output from the UKCS will provide 8-16% of total UK gas supply. According to figures from the Department of Energy and Climate Change, the UK's net energy-import dependency soared to 47% last year, the highest level since 1975

However UK gas imports in absolute terms fell last year to 48.2bn cm, down from 49.3bn cm in 2012 because of lower domestic demand. UK gas consumption has fallen sharply since 2010 as cheaper coal gained market share in providing gas-fired power generation. It has yet to recover. Last year the UK exported 8.98bn cm of gas. This was down from 11.96bn cm in 2012.  

National grid said there is a narrow range between its scenarios through to the end of this decade because of similar trends in efficiency, and economic trends offsetting demand levels between commercial and industrial sectors. In National Grid’s Slow Progression scenario gas demand remains low, but lower production from the UKCS and modest domestic shale gas production means imports would meet around 70% of demand by the mid-2020s. 

Norwegian supplies are higher than in the Gone Green scenario with combined LNG and continental gas imports peaking at 24bn cm/y in 2025.

In the Low Carbon Life scenario gas demand will be high but there will be more available capital to invest in developing domestic reserves. In this scenario both the UKCS and shale gas output are at their highest, which leaves much less room for imported gas. This scenario expects total LNG and continental imports to fall to around 8bn cm/y in 2026, though this rises again to around 18bn cm/y by 2035. 

Total imports, including of Norwegian gas, will meet around 40% of demand in 2035, compared with 56% in 2013.

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