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Institution of Gas Engineers and Managers (IGEM) Winter Outlook Conference

Malcolm Wicks MP,  Minister of State for Energy
DTI Conference Centre,  19 October 2006

Thank you [Steve Featherstone] for that kind introduction. My apologies that I was unable to join you at the start of the event this morning. However, I very much welcome this important event and the opportunity to contribute.

Experience last winter

I would like to begin by taking a step back to where we were last winter. As you know, gas supply was tight, with concerns about imports, leading to high and volatile prices. We recognise the impact that this had on industry, as well as on domestic consumers. It was a difficult period for everyone and something we continue to take very seriously.

Last winter, we also witnessed that despite having some new importation and storage infrastructure place, the gas did not always flow freely when we needed it most. To address this for the coming winter, I recently visited Norway to discuss new supplies and was at the opening of the Langeled pipeline earlier this week. I also recently attended a meeting of the Interconnector Commission to press the case for full utilization of importation capacity over the winter.

The UK has one of the most liberalised, competitive energy markets in the world, but there is a limit to what can be achieved in isolation, particularly as our reliance on imported energy increases. The European Commission has now got the bit between its teeth on market liberalization; we are fully supporting the serious steps the Commission are taking to tackle this problem.

This Winter

We go into this winter in a better position. The Met Office is predicting near average temperatures for the coming winter and we have seen significant investment in new infrastructure.

I have mentioned the Langeled pipeline from Norway, which has the capacity to meet 20% of the UK’s annual gas demand. The further enhancement to the Belgium-UK interconnector has commissioned two months early, giving it an extra 50% import capacity ahead of winter.

The BBL Pipeline, from Balgzand to Bacton, is also due to commission for 1 December and will bring gas supplies from the Netherlands. In addition, the Execerate LNG importation project in Teesside remains on track to commission for the winter.

Repairs to the Rough storage facility have also been successfully completed, and the facility is full, with gas available for withdrawal.

National Grid has said that gas supplies should be able to meet daily demand under most reasonable weather scenarios. However, the supply situation remains fairly tight and no-one is being complacent.

We continue to work closely with National Grid, Ofgem and the industry to ensure that sound preparations have been made to maximise supplies of gas for the coming winter.

The Longer Term

Within the next 2 years, additional gas import capacity equivalent to about 70% of GB's annual gas consumption is due to commission. This includes extra supplies via Langeled from the giant Ormen Lange field, extra capacity through the BBL pipeline and two significant Liquefied Natural Gas (LNG) terminals at Milford Haven.

Also, there are ten new storage projects which, if all go ahead to schedule, will double our storage capacity by 2010. This is very positive news, which should ease pressure on prices for winter 07/08 and beyond.

Consultations

As I’m sure you are aware, we are in the process of launching a number of consultations following the publication of the energy review conclusions in July. Earlier this week, I launched a consultation, which takes a longer-term look at the effectiveness of current gas security of supply arrangements.

This consultation seeks views on whether current arrangements are effective, their robustness as we move to greater import dependence over the next 10-15 years and whether new measures are needed to strengthen them.

Planning

We have also recognised that the planning system needs to be streamlined and it needs to deliver. We'll be acting to ensure that energy companies, whether seeking to build gas storage facilities, wind farms or any other kind of large energy installation, are not faced with costly uncertainties and delay. Local concerns about specific sites must be taken into consideration, but the right balance has to be struck with the national need for vital new energy infrastructure.

The Government is working on a comprehensive 3-point programme to help these and future gas supply projects proceed: legislation (when Parliamentary time permits) to establish a regime for the storage of gas in salt caverns offshore; a review of the onshore consents regimes; and a public information programme.


Gas quality

My Department has also been looking into gas quality issues, and DTI officials have been liaising closely with representatives of the gas industry, including appliance manufacturers and future gas import project operators.

A consultation was launched at the beginning of the year and a report will be finalised by the end of this month. However, the Government has no plans to introduce an early change to the UK’s gas quality specifications, and there are no indications that investment in gas appliances, import infrastructure, or elsewhere in the industry, is being deterred on grounds of gas quality.

Emergency Planning

As part of proper contingency planning, we have updated the gas emergency planning arrangements, consulting industry and other Government Departments. In case you have not already responded, can I remind companies that the consultation on the Gas Priority User arrangements is due to close tomorrow.

I am pleased that today, IGEM is publishing a guidance note for industrial and commercial gas users to assist them with their contingency planning in the event of a gas supply emergency.

I am also aware that IGEM has taken over responsibility for local gas supply emergency procedures, and I very much welcome IGEM’s involvement.

Conclusion

In preparing for the coming winter and beyond, the Government remains committed to competitive markets as the means of delivering security of supply. This creates a gas industry involving many players.

I am pleased therefore that IGEM is working to share information across all disciplines within the gas industry. For our part, we have established the Business Energy Forum, a high-level strategic group to bring together key players, bringing a strategic focus to winter preparations, and ensuring there is effective communication and coordination of effort.

As a follow up action to the first Business Energy Forum meeting, we have created a dedicated winter energy supply resource on the DTI website, and this provides a single reference point for key documents and links to a range of publicly available information.

The UK is leading the way in liberalisation of energy markets, and IGEM has helped to create a new generation of gas engineers, equipped to operate in the liberalised, competitive market. I congratulate IGEM on its role in bringing about this major transformation.

I hope IGEM will to continue to play its role in helping to develop the UK’s strong energy industry, by supporting its diverse base of gas companies and their engineers and managers. It is through this work that IGEM can help the UK’s strong energy industry deliver for the coming winter and into the future.