Where's that gas coming from?

Britain is an island of coal set in a sea of oil and gas

The sentiment above has driven much of the UK's energy policy over the past 40 years, since North Sea gas first started flowing at the end of the 1960s. But no more; Britain became a net importer of energy in 2011 and its conventional gas reserves are drying up alarmingly fast. Data from DECC, the Department of Energy & Climate Change shows that production in 2011 (the last available full year) was 21% lower than in 2010, and that for the first three quarters of 2012 shows a continuing decline. So where is (or should) the gas be coming from?

Oddly, it is largely from the near continent, with over 50% of gas imports from the Norwegian North Sea, and almost 15% from Belgium and the Netherlands (although some of this may ultimately have come from Russia). The balance of around a third is from liquified natural gas (LNG) and, perhaps surprisingly, this has been declining. Energy flows are always difficult to analyse, but it appears that higher demand for gas in Asia has raised prices in Qatar, which in 2010 was the largest single supplier of LNG into the UK, using ships that the one shown here.

ShipSpotting.com

© Knut Helge Schistad

Britain continues to get LNG from North Africa - notwithstanding recent difficulties in Algeria - as the recession in Southern Europe reduces demand there.

In one sense this is to be welcomed; LNG has significantly higher emissions than piped natural gas, largely due to the energy used in the compression of the gas (but also due to some needed for decompression, and the fuel oil used by ships bringing the LNG to the UK from Qatar). But it also shows a risk: when a Norwegian pipeline (Langeled) was recently out of commission due to a power cut, prices spiked and the UK was temporarily suffering a significant shortfall of supply. In the third quarter of 2012 this one pipeline provided 33.6TWh of gas, compared to total national consumption of 65.5TWh. As always, diversity of supply is important for security, especially as Norwegian production has also peaked.

So is shale gas the answer? Almost certainly not in the UK for other environmental considerations, although the development of US shale resources has lowered global gas supplies as they too are importing less LNG. Going back to coal is not an option either, for both CO2 and practical reasons (although it is sad that an underground fire has led to the loss of the UK's largest remaining coal mine). I am afraid that the real answer in the longer term is that we still need to cut demand, through greater energy efficiency, and to support this with other offshore technologies - wind, tide and wave. So finally we may one day be able to say:

Britain is an island of efficiency set in a sea of wind and waves

Peak Prices, Peak Oil – and Peak CO2 emissions?

I have resisted the temptation to comment over recent energy prices, especially that of oil. There’s a real danger of gloating over the high prices that may make renewable energy look a whole lot more attractive (in economic terms at least), even though it may simultaneously be driving as many as 2 million UK households back into fuel poverty. When oil prices first $100/barrel, my reaction was that it would be short-lived, especially as it seems that the first trades were done by a small player keener to be the record breaker than to set a sustainable price.

But now we have had oil prices of over $100 for several weeks, and Goldman Sachs are predicting $200 by the end of the year. Again my instinct is to say that if they are talking oil prices up, there is only one way that it can go (and that’s down). And yet the men in braces are willing to commit to $140 oil on futures (and as I write West Texas is around $135/barrel)¹. But we have got a real surge in oil prices: almost back to 1973 levels when inflation adjusted, and certainly well above the trend of the last decade. So what might this do for sustainable energy?

Firstly, it must provide added impetus to energy efficiency. The cheapest barrel of oil is always the one not used, and even though efficiency may have significant upfront costs, there is something very compelling about not having to buy oil when you are saving over $100 a barrel. (And we must remember that it’s not just oil: global gas prices tend to follow oil, as does tradable electricity in open markets such as the UK. Hence my concerns about fuel poverty.)

Secondly, it may also add to pure energy conservation – the avoidance of waste. US gasoline consumption fell by 0.4% in February 2008², the first recorded fall for several years, as hard-pressed consumers avoided unnecessary trips to the local supermarket, planning their shopping trips more carefully. Now a single month’s data may be unreliable, but the strong price signal being given when gasoline is $3.50-$4.00 a (US) gallon can’t be totally ignored, especially by those feeling the double whammy of an incipient recession. Even in New Jersey (where – somewhat perversely – US gas prices are lowest, despite a state-wide ban on self-service), the $2.99 gallon is fast becoming a fading memory. Of course, Western European consumption has been falling for years, partly due to a switch to more efficient diesel cars (not the Energy Don’s favourite, it must be said, as he doesn’t like particulates and the carbon emissions are hardly lower), but also – in countries such as the UK – due to lower average mileages. (This latter effect is reported by DfT, but not wholly understood, but may be linked to “anti-car” policies such as parking restrictions and the London congestion charge, or to broader economic issues such have been seen in the USA. Alternatively, it may be related to higher fuel prices, as the AA say³.) What's more, this does not just extend to road travel; American Airlines are reported to be cutting a significant proportion of their flights due to lower passenger numbers and higher fuel prices.

Thirdly, it will support the development of low-carbon renewables, most of which have high initial costs built low or zero running (fuel) costs. We are seeing this at a macro level in the planned floatation by EDP (Electricity of Portugal) of part of its renewable energy subsidiary (EDP Renováveis) – taking advantage of both high electricity prices and the need to raise additional capital to raise further investment. EDP is a specialist in wind power and at the current level of €65/MWh many turbines are profitable without any support mechanisms. But other renewables are also looking more attractive: my friend Steve claims that he can sell me PV with a payback of 7 years, and even allowing for his usual mathematical tricks, I suspect that his imported Chinese units may have a true payback of 15 years.

So how does this relate to peak oil? It seems that global production is stuck in a rut of around 85 million barrels a day (a back of the envelope calculation still suggests that this is equivalent to the realise of a further 35 million tonnes of CO₂ a day) and that non-OPEC countries cannot raise production and OPEC countries won’t (or maybe cannot either, although they are understandably a bit coy on this point). This may act a cap on production at any price, and hence as a peak CO₂ emission. (OK, I have forgotten coal, and there’s an awful lot of heavy oil in Canadian oil sands.) But if this is a peak figure it may help climate modellers establish the worst-case CO₂ concentration on a business as usual scenario. That’s the good news; the bas it that with global concentrations still rising by 1.7 to 2 ppm per annum, there is s dangerously high level of new emissions, with the risk of really catastrophic global warming by mid-century.

In the meantime, we should be slightly thankful for the high prices, as they should act as a spur to more sustainable energy systems. And that applies not just in Europe and America but in the rapidly developing countries; if China’s central planners foresee high oil prices, they may wish to encourage Chinese industry to be more energy efficient, and Chinese cities to allow for better public transport as well as more cars and highways.

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¹ BBC website (22/5/08) says "US light, sweet crude for July delivery reached $135.04, taking its gain for the year so far above 40%." See http://news.bbc.co.uk/1/hi/business/7414093.stm

² Financial Times, 20 May 2008

² Edmund King of the AA, speaking on Radio 4's Today, 22 May 2008