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News Extra: EIA forecasts UK will import 76% of its natural gas needs by 2030

01 September 2014

In a new report on the UK’s energy sector, the US Energy Information Administration has provided the latest analysis of the country’s upstream and downstream gas sector, including updated estimates of production and consumption.

Shale drilling at Balcombe in Sussex - Image: Cuadrilla
Shale drilling at Balcombe in Sussex - Image: Cuadrilla

The United Kingdom is the largest producer of oil and the second-largest producer of natural gas in the European Union. Following years of exports of petroleum and natural gas, the UK became a net importer of all fossil fuels for the first time in 2013. The UK government has developed key energy policies to address the domestic production declines. These include: using enhanced recovery from current and maturing oil and gas fields, promoting energy efficiency, decreasing the use of fossil fuels, promoting energy trade cooperation with Norway, and investing heavily in renewable energy.

The UK's natural gas production has been on a long-term declining trend, although the country continues to produce sizeable natural gas volumes. Since domestic production of natural gas peaked in 2000, the UK has become increasingly reliant on imports to satisfy its demand. In 2013, domestic natural gas production accounted for just over a third of the UK’s natural gas supply, according to the UK Department of Energy (DECC).

According to Oil & Gas Journal, the UK held an estimated 8.6 trillion cubic feet (Tcf) of proven natural gas reserves as of January 2014. Most of these reserves occur in three distinct areas: 1) associated fields in the UKCS; 2) nonassociated fields in the Southern Gas Basin, located adjacent to the Dutch sector of the North Sea; and 3) nonassociated fields in the Irish Sea. The UK government has encouraged the use of natural gas as a substitute for coal and oil in industrial consumption and electricity production.

The UK produced 1.3 Tcf of dry natural gas in 2012, and preliminary estimates  by DECC show natural gas production falling by 6% in 2013. UK natural gas production has been declining every year since 2000. The largest concentration of natural gas production in the UK is the Shearwater-Elgin area of the Southern Gas Basin. The area contains five gas fields: Elgin, Franklin, Halley, Scoter, and Shearwater. Most of the leading oil companies in the UK are also the leading natural gas producers, including BP, Shell, and ConocoPhillips.

UK's largest share of natural gas production among all fields and gathering systems comes from the Scottish Area Gas Evacuation (SAGE) system, which produced a total of 246 billion cubic feet (Bcf) in 2011. In addition to SAGE, the Shearwater-Elgin Area Line (SEAL) produced more than 200 Bcf of natural gas during the year.

Shale gas

The United Kingdom has substantial volumes of prospective shale gas and shale oil resources within shale formations distributed broadly in the northern, central and southern portions of the country. The risked, technically recoverable shale resources of the UK are estimated at 26 Tcf of shale gas and 0.7 billion barrels of shale oil and condensate in the two regions assessed by the 2013 EIA/ARI shale gas and oil report

Compared with North America, the shale geology of the UK is considerably more complex. Shale testing is still at an early phase in the UK. In a temporary setback, the first shale well triggered a series of minor earthquakes related to a nearby fault. Following an 18-month moratorium, the government concluded that the environmental risks of shale exploration are small and manageable. The government allowed shale drilling to resume in December 2012, albeit with stricter monitoring controls.

Consumption and imports

UK Shale gas and oil map - Source EIA/ARI
UK Shale gas and oil map - Source EIA/ARI

Natural gas consumption in the UK was 2.6 Tcf in 2013, a 1% decline from the prior year. Natural gas for electricity generation, heat, and the residential sector accounted for 64% of total natural gas consumption. The industrial sector accounted for 24% of natural gas consumption.

In 2004, the UK became a net importer of natural gas. The UK imported about 1.3 trillion cubic feet (Tcf) of natural gas in 2013, with about 84% via pipeline and the rest from liquefied natural gas (LNG). EIA estimates that almost 60% of the UK’s pipeline imports in 2013 came from Norway, with additional gas coming from the Netherlands (16%) and Belgium (7%). According to projections from UK's DECC, the UK will be 76% dependent on natural gas imports by 2030.

Liquefied natural gas (LNG)

In 2011, the UK demand for LNG surpassed that of Spain for the first time, and UK became the largest market for LNG imports in the EU. That year, UK imported a total of 892 Bcf of natural gas. However, in 2012 the UK LNG demand fell behind Spain's at 504 Bcf, according to PFC Energy. LNG imports in 2012 fell as pipeline imports rose, mainly those from Norway, as LNG cargoes were diverted to higher-priced markets in Asia.

LNG imports, particularly from Qatar, fell by 30% between 2012 and 2013 because of declines in UK gas demand and strong competition for LNG in global market, particularly from Japan after the country closed its nuclear facilities following the Fukushima plant meltdown. LNG imports accounted for 18% of the total in 2013, down from 28% in 2012. Qatar accounted for virtually all LNG imports in 2013.

Currently, the UK has four LNG import terminals:

*The country's longest-operating LNG terminal is National Grid's Grain LNG terminal on the Isle of Grain. The facility originally became operational in 2005, and following a number of expansions, the terminal can receive and process 1.9 Bcf per day of LNG, according to PFC Energy.

*Teesside LNG, operated by the U.S.-based Excelerate Energy, commenced commercial operation in February 2007. This was the first dockside regasification port and the second operational LNG facility in the UK. Teesside LNG can deliver up to 400 million cubic feet (MMcf) per day of natural gas to the UK market.

*The Dragon LNG terminal, a collaboration of BG, Petronas, and 4Gas, began operating in September 2009. The import, storage, and regasification terminal is located in Milford Haven in South Wales with a regasification capacity of 580 MMcf per day.

*The South Hook LNG terminal, also located in Milford Haven, Wales, is owned and operated by Qatar Petroleum, ExxonMobil, and Total. Europe's largest LNG terminal became commercially operational in October 2009 with an initial capacity of 1.1 Bcf per day. Following the expansion in Phase II, the terminal's capacity has expanded to 2.1 Bcf per day.

In March 2013, Centrica signed a 20-year agreement with Cheniere to import LNG from the Sabine Pass LNG facility in Louisiana. Although Cheniere still needs to receive necessary approvals for exports, export volumes would total approximately 85 Bcf of LNG per year and would begin in 2018.

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