Providing for the UK’s Energy Needs

UK Gas Market

Comparison of UK and European gas prices: Based on published data, the UK appears to remain among the lower cost countries for gas in the EU for small, medium and large industrial and commercial users. This must in part reflect the degree of liberalisation in the UK market, though it remains to be seen whether liberalisation will deliver a similar price regime across Europe. However, very large users appear to be currently paying more for their gas in the UK than in Europe for the first time since liberalisation of the market 10 years ago.

Figure 22: Gas Prices in Europe 2004 - 2005

New Gas Import Projects: It is estimated that the market has already committed some £10 billion in new capital to supply the future needs of the UK, with a further similar amount expected in the next few years. These gas imports may cause prices to decline but they will still be subject to the price of oil, the timely completion of import projects and the evolution of the wider European gas market.

The capacity of the existing Bacton – Zeebrugge Interconnector will be increased by 8 bcm per annum by 2006 and an additional 8 bcm per annum by 2007. The BBL line - a new interconnector with 15 bcm per annum capacity from Balgezand in the Netherlands to Bacton is now under construction; first gas is scheduled to flow in 2007. The Langeled pipeline will provide import capacity of 23 bcm per annum from Ormen Lange in Norway, with first gas scheduled to be landed in 2007.

Liquid natural gas (LNG) is proving to be a new source of gas supply for the UK. Imports will be received from Algeria at the Isle of Grain from 2005 and from the Middle East at Milford Haven from 2007.

Figure 23: New UK Gas Import Projects