• Wednesday, 16 May, 2012

All change for the UK gas man...

 11 March 2005 00:24 GMT

British utility Centrica believes the UK will find itself in strong competition with the US for future LNG supplies and that not all the new infrastructure currently being built will necessarily end up being run at full capacity.
Centrica's head of LNG Simon Sydenham told the ICBI Flame conference in Amsterdam he expected LNG imports to account for around 25% of UK gas supplies by 2010 to 2011.

"However, it would be difficult for the UK to have to solely rely on LNG as in order to create baseload supplies the country will need imported pipeline gas," he said.

Sydenham added that the cheapest source of new supplies into the UK would be Norwegian gas followed by LNG import projects and then finally Russian gas, which "still had some way to go" to be competitive in the marketplace.

Britain's rapidly dwindling indigenous gas resources are set to be replaced by fresh supplies from three big new LNG import terminals and three new gas pipelines, which together will transform the shape of the UK's energy market over the next few years.

Sydenham said the UK gas market is "extremely unpredictable" but grid operator Transco's forecasts show a steep drop-off in indigenous supplies over the next few years, which would largely be replaced by LNG from the Middle East and North Africa and pipeline gas from Norway and Russia.

He said although there were "a few delays", the start-up of the UK's first LNG imports into the Isle Of Grain should happen in April or May under the phase one contract held by BP and Algerian state company Sonatrach for 5 billion cubic metres per year.

Further LNG imports are due to begin at the 3 Bcm per year BG/Petronas Dragon terminal at Milford Haven in south Wales from October 2007.

Centrica last August secured the UK's first major long-term LNG contract with Petronas subsidiary Asean LNG Trading Company.

The 15-year supply deal will deliver more than 45 Bcm of gas to British Gas customers over the contract term.

In addition, ExxonMobil and Qatar Petroleum expect the first LNG supplies from the South Hook Terminal, also located at Milford Haven, in 2008. The recent announcement of an expansion of the regasification plant will mean a doubling of its capacity from 7.8 million tonnes per annum to 15.6 million tpa.

Sydenham said LNG chains in the UK are "very difficult to bring together" but that future expansion of terminals is still possible. "The terminal operators in the UK are all applying for and I expect will get third-party exemption from the regulator," he said.

Three major pipeline projects are also set to bring new gas supplies into Britain.

The phase one expansion of the Bacton to Zeebrugge Interconnector is due to increase itsimport capacity by 8 Bcm to 16.5 Bcm per year in December 2005.

Phase two will see a further expansion on the line by 8 Bcm to 23.5 Bcm per year in December 2006.

Norway's Langeled pipeline is due to start bringing in around 20 Bcm per year to the UK east coast Easington terminal in late 2007 and a new Gasunie line from Balgzand in the Netherlands to the Bacton terminal is expected to import up to 15 Bcm per year over the next few years.

A Baltic pipeline to bring gas from Russia could be linked into the UK by 2012.

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