UK gas supplies have been under scrutiny after the “Beast from the East” recently brought freezing conditions and increased demand for heating.
Today, an editorial in the Sun says: “We are relying on Russia, a hostile power, to heat our homes.”
The UK is, indeed, increasingly reliant on gas imports, because domestic production from the North Sea is drying up. However, the vast majority of imports come from Norway, the Netherlands and Qatar. This year, as in previous years, Russia accounts for much less than 1% of UK supplies.
Meanwhile, UK demand for gas is falling significantly, a trend that is set to continue. This could make the UK less reliant on imported gas.
UK gas supplies
After the discovery of gas under the North Sea, UK supply of and demand for gas rose rapidly. Demand rose roughly 10-fold between 1970 and 2000. Since then, domestic production has more than halved. Once a net exporter, the UK now gets about half its gas from overseas.
The chart below shows this shift, with the share of UK supplies coming from domestic production (blue) declining fast. This share has remained around 45% since 2011, as previously falling production has levelled off.Share of UK gas supplies coming from domestic production (blue), imports via pipeline (yellow) and LNG shipments (red) between 1998 and 2017. For simplicity, the figure excludes exports and drawdown of stocks. Source: Department of Business, Energy and Industrial Strategy (BEIS) Energy Trends chapter five.
Most gas imports to the UK come via pipelines, primarily from the Norwegian sector of the North Sea. Pipelines accounted for 45% of supplies in 2017, as the chart above shows. The remaining 8% of last year’s supplies came via shipments of LNG, mostly from Qatar.
A more detailed breakdown of the source of imports is below.
In 2018 to date, domestic production accounts for 33% of UK demand, imports from Norway a further 39% and other pipelines another 20%, according to figures from ICIS, an information provider. It says LNG shipments have accounted for just 2.9% of supplies in 2018 to date, including 0.4 percentage points from Russia.
Storage is an important part of supplies during the cold winter months, but is less significant across the whole year. In 2018 to date, some 5% of supplies came from stocks, ICIS says.
“We find that the diversity of supply and the available capacity underpin the strength of the GB system. This system must be supported by a market that continues to be price responsive, allowing the GB market to attract sources of gas when they are needed…We are secure now, and the GB gas system is well placed to continue to be secure and robust in a range of supply and demand outcomes over the next two decades.”
Similarly, National Grid’s Winter Outlook report, published last autumn, says: “GB continues to benefit from a wide range of dynamic supply sources. We expect there to be sufficient gas available from these sources to meet winter 2017/18 demand.”
A spike in gas prices caused by recent freezing temperatures drew additional LNG cargoes, including from Russia, to the UK market. During the cold snap, gas demand was 40% above the usual level.
UK gas imports
So where does the UK import gas from and how has that changed? As noted above, most imported gas comes to the UK via pipeline, since this is much cheaper than liquefying, shipping and regasifying supplies from further afield.
The lion’s share of gas imported to the UK is piped from Norway, which accounted for 40% of supplies last year, as the chart below shows. Similarly, Norway has supplied 39% of demand so far in 2018, ICIS says. Norwegian imports have increased rapidly as UK production dwindled.Share of UK gas imports coming via pipeline (shades of yellow) or LNG shipments (shades of red) between 2000 and 2017. Five countries account for the vast majority of imports: Norway, the Netherlands, Belgium, Qatar and Algeria. Russia does not feature in the data to 2017. Source: Department of Business, Energy and Industrial Strategy (BEIS) Energy Trends chapter five.
The second largest source of pipeline imports is from the Netherlands, where the onshore Groningen gasfield is facing production curbs after it caused dozens of earthquakes. Dutch imports accounted for 9% of UK supplies in 2013, falling to 2% last year. A gas pipeline from Belgium is a smaller source, though the country has no gas production of its own. Instead, it connects the UK to the wider EU grid, so it may indirectly contain Russian gas.
In terms of LNG shipments, Qatar has accounted for 70-97% of volumes imported to the UK since 2005. The UK will receive its next LNG shipment from Qatar on 24 March, ICIS says.
Imports from Russia are a new phenomenon, not previously recorded in BEIS data. This follows the December 2017 opening of the Yamal LNG terminal in Siberia. This is a joint venture between French firm Total, Russia’s largest private gas firm Novatek and Chinese interests.
In total, the UK has received six LNG shipments this year, of which half (three) were from Russia, the Financial Times reported this week. However, these shipments still represent a relatively tiny share of UK demand.
"Not very reliant at all, in the case of the UK. So roughly less than 5% on average, in a year, of our gas comes from Russia "@watsonjim2
"Europe in general it’s much higher, and as you as go closer to the Russian border… vulnerability changes as you move from west to east" pic.twitter.com/wQzKW6AV2u
— BBC Daily Politics and Sunday Politics (@daily_politics) March 15, 2018
“Russian LNG from Yamal has supplied approximately 0.4% of the UK’s gas demand so far this year,” Ed Cox, editor of global LNG markets at ICIS, tells Carbon Brief. The three Russian LNG shipments have actually delivered around twice this volume into the UK system. However, the other 0.4% remains in storage and may never enter the UK market, instead being sold overseas.
This gives continued backing to the line from BEIS ministers, who have previously said that much less than 1% of UK gas comes from Russia. Quoted in the Financial Times story on Russian imports, BEIS repeated this line, which is confirmed by the ICIS data.
In other words, it is stretching credulity to suggest that the UK is “relying on Russia, a hostile power, to heat our homes”.
The Sun's lead editorial today (incorrectly) claims that the UK is "relying on a hostile power to heat our homes". Uses the Russia story to promote (again) its vehement pro-fracking/anti-renewables stance… https://t.co/AYc52iEFxd pic.twitter.com/KNDwwjjq4t
— Leo Hickman (@LeoHickman) March 16, 2018
In the wake of the spy scandal, prime minister Theresa May has said the UK is looking for alternative sources of gas outside Russia. However, the government currently has no control over the spot market for gas.
Looking ahead, Russian supplies from the Yamal terminal are likely to be tied to long term contracts with Asia, ICIS’s Cox tells Carbon Brief. The terminal is due to increase capacity later this year and could supply into the UK market, “depending on demand and price”, he says.
“A new US export plant, Cove Point, has just started up and the first cargo, the Gemmata, will arrive into the UK on 20 March. Deliveries of US LNG into Europe are unlikely to rise substantially this year with the bulk of new US production expected to start up over 2019-2020.
“Europe is expected to buy more LNG in the future as domestic gas supply reduces but it could be more expensive than pipeline gas given competition from premium LNG buyers such as Japan and China.”
UK gas demand
Alongside the changing nature of UK gas supplies, another significant change continues largely unnoticed: UK demand for gas is falling and will continue to do so.
Looking ahead, this trend is expected to continue, for similar reasons – despite a collapse in funding for energy efficiency improvements in England. By 2025, gas demand will fall another 25%, according to the latest BEIS projections.UK gas demand 2000-2016 and projected for 2017-2025, millions of tonnes of oil equivalent. Source: BEIS energy and emissions projections 2017.
There is technical potential to cut gas demand even faster than this, according to research published last autumn. One of that report’s authors is Pedro Guertler, senior policy adviser to thinktank E3G. Energy efficiency improvements in the domestic and services sectors alone could save gas equivalent to two-thirds of current imports, Guertler tells Carbon Brief.
Having lower demand for gas will help make the UK energy system more resilient to shocks, says Prof Jim Watson, director of the UK Energy Research Centre (UKERC). However, this is not guaranteed to cut imports, Watson says, as this depends on their price relative to domestic output.
He tells Carbon Brief that flexibility in the gas market is also vital to maintain a resilient system, for example through gas storage and demand response.
As to the Sun’s contention that fracking is the answer, Watson says: “We don’t know whether UK fracking would have changed the current situation, because it depends on economics. We might have had more domestic gas but it might not have been cost-competitive compared with imports.”