Soaring domestic energy bills, sudden industrial shutdowns, and warnings of food shortages – all happening this weekend – reinforce the need to maintain the UK’s North Sea gas supplies, said OGUK, which represents the nation’s offshore oil and gas industry.
Wholesale prices for gas have surged 250% since January with a 70% rise since August alone. The causes are global – European gas stocks are down, supplies from Russia have declined and there is strong demand for liquefied natural gas from Asia.
The effects on the UK are however particularly strong because it is one of the largest consumers of gas in Europe, at 44 billion cubic metres per year, mostly for domestic and industrial heating.
Ofgem, the government energy regulator, has warned UK consumers to expect an average £135 rise in home energy bills this winter. Business has also been hit with two large UK fertiliser plants shutting down due to the high prices and others expected to follow.
The effect has been amplified this weekend by a high-pressure weather zone causing very low winds, meaning a decline in windfarm output.
Gas-fired power stations normally provide a third of the nation’s power but on Saturday National Grid data suggested that more than half of UK electricity was coming from fossil fuels – mostly gas but also some coal. Wind was providing just 1.2% of power while another 9% was being imported from the EU via interconnector cables. Most of that was also from gas fired power stations.
The UK gets about 73% of its total energy – also including transport and heating – from fossil fuels.
The crisis coincides with discussions on whether to open new gas fields in the North Sea to replace those running out or becoming economically unviable to produce. OGUK predicts that UK North Sea output will roughly halve by 2027 unless new fields are opened. If that happens the UK will be even more reliant on imports than now.
OGUK Energy Policy Manager Will Webster said:
“This price surge shows how we continue to need UK gas. Letting production fall faster than we can reduce demand risks leaving us increasingly dependent on other countries, and at the mercy of global events over which we have no control.
“While the UK continues to use oil and gas, we should make the most of the resources in our control while working for a low-carbon future.”