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Malcolm Wicks MP, Minister of State for Energy
London, 18 February 2008
Very pleased to see so many people here. I will second Martin’s welcome to you, and I want to thank EEF for sharing this event with my department and for hosting it here.
It’s good to see, on today’s agenda, contributions by people working at each stage in the supply and use of LNG. I would like to welcome all the speakers and thank you in advance for your contributions.
As we are all acutely aware, energy prices have been rising globally. The best way we can deal with present and future uncertainties is to give our market access to all the options for supply available.
The Government doesn’t want to tell you how to run your businesses, or tell you that you have to use a fuel from one particular source. Markets are better able than Governments to adapt to changing circumstances. But we can help to inform businesses about the choices available, through events like this and publications like the Energy Markets Outlook. We can provide opportunities for people with different interests in the same subject to meet and exchange views. The purpose of BERR’s Energy Markets Outlook (or EMO) is to help consumers and suppliers of energy to take timely and well-informed decisions. This is the second event under the EMO banner. In your pack for today, you will also find a copy of the Gas chapter of the Energy Markets Outlook report we published in October. That publication is only the start of a dialogue, my department will develop it with input from industry, from people like yourselves. You can find Energy Markets Outlook in the Energy section of the department’s website.
In EMO, BERR has developed scenarios for the future of energy in the UK. It’s possible that the market collectively will deliver a different result from those we have considered. It’s possible that LNG will account for a lesser proportion of our energy supply than we’ve supposed. But it’s important that choices made by companies in the markets are made with a good understanding of the real factors influencing future supply and demand.
LNG is not new in the UK. It is a mature and proven technology with a history here. LNG shipments first came to the UK in 1959, but the trade declined and came to a halt in the mid 1980s, when increased production of North Sea Gas reduced our need for imports. Well, LNG is back and making a very welcome contribution to the UK’s energy mix. And, by 2017, LNG import capacity in the UK could represent 23% of our peak supply capacity.
Gas accounts for over half of our primary energy consumption for non-transport purposes, more than 30% of our electricity generation, and it is a crucial fuel and chemical feedstock, for industry. The decline in our indigenous gas production has presented a major challenge. To meet it, we in Government have sought to create the right conditions for the market to work in, developing an appropriate regulatory framework, and seeking to identify non-commercial barriers. This approach has borne fruit. We now have 9 billion cubic metres / year capacity for LNG imports, 4 terminals in operation or development, with more proposed. Over 1,400 gas equivalent mcm came to the UK last year as LNG. Our import capacity for LNG will increase fivefold by 2010.
Storage is also crucial to security of supply and prices, and there too we are making progress. There are currently 9 gas and LNG storage projects that have already gained consent and are under construction or awaiting it. Completion of these facilities will lead to an additional 920 Million cubic metres of gas equivalent of LNG in tank storage, and 1,850 Mcm of underground gas storage. These projects could constitute a 57% increase in UK gas storage by 2015.
This investment in gas storage and supply infrastructure will put the UK gas market in a stronger position to deal with present and future risks. Access to the LNG market in particular will allow for greater flexibility to respond to shocks which may affect demand or supplies.
In March 2007, BERR employed Global Insight to look at scenarios for the global LNG market up to 2025. Global Insight forecast that, assuming continuation of current trends, the global LNG trade would treble in size between 2005 and 2025 from 200 to 600 bcm/yr. You will find a copy of the executive summary of the report on LNG in your pack for today.
LNG makes a real contribution now, and holds even greater potential for the UK’s energy diversity and security. I hope today’s event helps you to a fuller understanding of this potential. Enjoy the day.
