Cold snap `underlines need for UK gas incentives’

Britain’s gas reserves play a critical role to in the nation’s energy supplies, says Oil & Gas UK.

Offshore staff

ABERDEEN, UK – Britain’s gas reserves play a critical role to in the nation’s energy supplies, says Oil & Gas UK. While UK gas production is past its peak, further large volumes could be recovered from fields on the UK shelf, the association claims, thereby easing a predicted future energy shortfall.

“The ability of the UK gas market to respond to the recent cold snap and meet demand illustrates the importance of diversity in our gas supplies, which are in fact the most diverse in the European Union,” says Energy Policy Manager David Odling. “While additional storage capacity would play an important role in alleviating any tightness in the gas market during periods of high demand, it must not be forgotten that gas from under the seabed surrounding our own coastline should be our first line of defense.

“Oil & Gas UK believes that up to 1.5 tcm (53 tcf) of gas remain to be developed and produced from the UK continental shelf. Assuming domestic production and imports each satisfy half of our demand, this could last for some 30 years. However, gas projects must prove competitive enough to attract the required investment if these volumes are to be recovered.”

Odling argues that while the government’s newly proposed field allowance would encourage investment in some difficult fields, it had to be extended. He pointed out that one-fifth of UK gas resources are west of the Shetlands, where their remote location makes development expensive. Extending the allowance, he says, would help this province attract the £2 billion ($3.2 billion) in investment needed to bring the gas to the mainland.

“In addition, a broadening of the rules around the new field allowance would promote investment in technically difficult ‘tight’ (i.e. geologically complex) gas and the reserves remaining in existing fields in the southern North Sea,” says Olding.

The government now had to work with the industry to rebalance the tax regime, he suggests, to ensure the country makes full use of its resources.

01/08/2010

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