Gas is different to oil. Oil is sticky and is hard to get out of the rocks where it lies. Gas flows freely between the pores in the rock. Why is this important? With oil we get a lot of warning as we run out. With gas there is less warning. If you opened up all the taps on a gas well the gas would blow away in one big puff. A gas well could die in months.
It is hard to transport gas over long distances. If you want to transport gas over oceans you need to turn it into a liquid so it can be carried on a ship. Liquid natural gas is also called LNG. Natural gas has to be cooled to minus 160 centigrade to turn it into a liquid. It takes a lot of energy to turn ordinary gas into a liquid and back into gas again. The process wastes about one third of the energy in the gas.
LNG is very dangerous and difficult to handle. Pipes and valves must be made of expensive and scarce metals like nickel and chromium. Water and carbon dioxide go solid and block up pipes and valves. Very cold liquids like LNG can cause severe injuries that look like burns.
Some of the rules about oil also apply to gas. You have to find gas before you can use it. Finding gas in the North Sea came to a peak in 1970 [Future of Natural Gas Supply, Jean Laherrere. UK features on pages 23, 24 & 25]. As gas has to be found before it can be extracted the peak of production must follow a peak in discovery of gas. Gas production duly peaked in the British part of the North Sea in 2000 [DTI, Energy - Energy statistics: Gas, Natural gas production and supply]. All the extra gas we use from now on will have to be imported.
UK Gas Imports
National Grid (formerly Transco) is the company who owns the major pipes that transport gas between beach terminals and cities. National Grid estimates that gas import requirements are set to reach 46% by 2010 and 67% by 2013/14. National Grid demand forecasts indicate a 15% increase in annual gas demand by 2013 or 2014 [National Grid Transco Transportation Ten Year Statement 2004]. BP estimates that by 2020 up to 80-90% of the UKs gas could be imported [Second Submission by BP to the PIU Energy Review].
Importing this much gas will require huge new pipelines [Financial Times, Marathon sees need for 4 - 5 North Sea gas pipelines, 14 May 2002], lots of big ships to bring in LNG and huge terminals on the seaside to unload and store LNG.
It costs about one million pounds per kilometre to build a big gas pipeline. Britain will need thousands of kilometres of new gas pipelines. The new LNG import terminal at Grain on the Thames estuary is set to cost more than 500 million pounds.
It will take a lot of time to build all the necessary equipment to transport all our imported gas. Many people will object to new pipelines going past their houses and LNG terminals on the seaside [Safety issues LNG terminals in West Wales]. These objections will take time to deal with. New laws in parliament may be required to speed up the process.
There will be many other countries competing for gas imports. Gas may be used to make electricity, diesel, fertilizers or other chemicals. There may not be enough gas left over for us. Campaign groups in Bolivia have been resisting efforts to export its gas as it is valuable to local people. Exporters may form a cartel to keep prices high. There is already an organisation called the Gas Exporting Countries Forum. These problems mean that the price of the imported gas may be too expensive.
Gas Imports and the EU
Politicians in Britain have complained that other countries in the EU have failed to deregulate their gas markets, and allow the UK to buy gas to import. Of the 25 countries in the EU, 23 are gas importers so they have little incentive to sell any of the gas they have. Only Denmark and Holland are gas exporters [EuroGas. statistics 2004, pdf file. Natural Gas Sales and Supplies, p6]. Gas pipelines are major hazard installations, with significant impact on the communities they pass through, and very expensive to build. Extra pipelines for sending gas to other countries are rarely built. Other gas importing countries in the EU have relied on long term contracts to ensure reliable gas supplies at a reasonable price, this has worked better than a deregulated free market for them.
Gas Depletion Hits Home
As this is written in March 2006, these problems are becoming reality.
The declined in domestic gas supplies has been much more severe than forecast. It was expected by mainstream analysts that gas production would decline at about 1% per year from 2000 till 2008 [POST note, October 2004. Number 230, Parliamentary Office of Science and Technology, The Future Of UK Gas Supplies]. In reality the decline is becoming much steeper as can be seen in the data below (mcm = million cubic metres):
2000 115 mcm (peak year)
2001 112 mcm -2% year on year
2002 110 mcm -2% year on year
2003 109 mcm -1% year on year
2004 102 mcm -7% year on year
2005 (first 6months) 5.3% year on year
2005(June to September only) 13.8% year on year
Source: DTI see www.dti.gov.uk
If this trend holds for 2005 then a decline of 8% for the year might be expected. That would be a 21% decline in production from peak in the year 2000.
Although facilities to import gas are in place there is not enough gas to fill them, or not at a price we are prepared to pay.
There is a pipeline that connects the UK to the continent called the Interconnector. The Interconnector pipeline is under-utilised. On 22 November 2005 Centrica (trading as British Gas) is reported saying that despite a 40p/therm price in the Netherlands and £1.20/therm on the UK market the interconnector was only 50% utilised [Independent Newspaper, 22 November 2005, UK blames Europe for gas shortages]. If there is insufficient pipeline capacity to move gas around on mainland Europe or people simply refuse to sell us gas then more import pipelines wont help.
Many articles suggest that the gas crisis in the UK will be over by 2008 when new pipelines are in place, but pipelines are no guarantee that there will be gas for sale to fill them.
There are big new gas supplies coming from the new Ormen Lange field in the sea off Norway, but this wont be enough on its own.
Factories have shut down because of the price of gas. On 1 December 2005 the Financial Times reported that Terra Nitrogen have shut down their Billingham plant [Financial Times, Blackouts Planned in energy shortage, 01 Dec 2005] because gas is so expensive.
The UK trade deficit from oil and gas imports may not be sustainable. With prices of 40p/therm gas imports could cost £10bn on top of the existing trade deficit this year. By 2020 the theoretical import bill could be £80bn per year on top of a trade deficit already swollen by oil imports. The trade deficit will tend to devalue the value of a pound. As we have to buy gas in dollars that will mean imports cost even more. There is an element of a vicious circle about this.
Electricity from Gas
Approximately one third of the electricity we use in Britain is made from natural gas. Expensive and scarce natural gas could lead to expensive and scarce electricity supplies. The proportion of gas used to make electricity rose dramatically in the decade up until 2004: some people call this the 'Dash For Gas'. As the shortage of gas bites prices for gas have gone through the roof and more coal and nuclear power have been used to fill the gap.
Fertilizer from Gas
The population of the world keeps rising. There are now more people on Earth today than all the people who lived and died in the past. Artificial fertilizers have been very important in feeding all these extra people. Natural gas is used in large amounts to make nitrate fertilizer. The natural gas is used to make hydrogen that is in turn used to make ammonia by the 'Haber' Process. GM (genetically modified) crops need extra fertilizers to make them worthwhile. Much fertilizer production in the UK is shut down as this was written (February 2006). Fertilizer factories have shut because of the rising cost of gas [Farmers Weekly interactive, 02 Feb, 2006. Fertiliser prices soar as plants remain shut]. Organic farmers will have their day when fertilizer gets too expensive to be worth it.
Gas is Special
Some industry needs clean powerful heat sources. Gas burns with a very clean flame, it is powerful and it is easy to control, this makes it especially valuable. Making glass, making paper and making special steel for ball bearings all currently rely on cheap natural gas. These industries could use oil or other fuels made from wood or coal but it would cost more.
90% of the hydrogen made in the world today is made from natural gas. Supporters of a hydrogen economy would find it useful to produce some of the hydrogen from natural gas. This could be used to get the hydrogen energy industry started. If natural gas is expensive it will make it more difficult to kick start the hydrogen business. The hydrogen economy is unlikely to become a reality for other reasons discussed in oil myths and facts elsewhere on this website.
Gas and Oil
If gas gets more expensive than oil, then users will go back to oil. This is already happening in the UK. When gas gets very expensive in winter, electricity generating stations and factories have been switching to oil. This will push up the price of oil. It means there is clear competition between oil and gas. The prices of the fuels are locked together. This means that people who drive cars and trucks are in direct competition for energy with electricity users. The costs of driving, the costs of trucking goods and the cost of electricity will all go up in the years to come. If there are problems with our oil supply it could affect electricity costs. If gas is short we may have to drive less or fly less so there is enough fuel to keep the lights on.
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