With the delivery on Tuesday of 27, 500m3 of the shale product ethane from the US to Scotland’s Grangemouth crude oil refinery, there has been a lot of comment in the UK media about the role of overseas gas suppliers to the UK.
At the moment, the North Sea produces 43% of the gas requirements of the UK; 44% is imported via pipelines from Europe and Norway and 13% by ship in the form of LNG with Qatar being a major supplier.
Gulf Times spoke to John Williams, senior principal at Pöyry Management Consulting, about the Grangemouth shipment and the wider UK picture.
He said, “The shipment received by INEOS at the Grangemouth facility in Scotland consists of ethane rather than natural gas, and in this form it is not a replacement for pipeline gas or LNG that is delivered into the UK.
“The ethane cannot be fed into the national pipeline grid to meet demand from power generators, other industry or residential customers; it is just used as a feedstock into INEOS’ ethane cracker.
“However, the US is beginning to deliver cargoes of LNG to Europe and some have claimed that ‘cheap’ US LNG can undercut the cost of other sources. In the context of Qatari LNG imports into the UK, our analysis would not agree with this view. The marginal cost of production of Qatari LNG is much lower than US LNG, which is based on the Henry Hub price. Therefore, LNG from Qatar can be delivered to the UK at a cost that is lower than the delivered cost of US LNG. We do not see a threat to the competitiveness of Qatari LNG from US shale gas exports.”
The South Hook LNG Terminal in Milford Haven, Pembrokeshire, Wales is one of Europe’s largest liquefied natural gas (LNG) regasification terminals. LNG is shipped from Qatar to the facility. After processing it is fed into the National Transmission System, a network of gas pipelines which run throughout the UK.
The South Hook terminal has a total processing capacity of 15.6mn tonnes per annum, which is equivalent to around 20% of the current UK natural gas demand.
The debate over what sources of energy the UK is going to rely on in the future intensified this week with the Labour party announcing that it has made the banning of shale gas production in the UK part of its mandate.
The shadow Energy and Climate Change Secretary, Barry Gardiner, in his speech to the Labour Party Conference in Liverpool on Monday said, “There are technical problems with fracking. And they give rise to real environmental dangers.
“But technical problems can be overcome. So on their own they’re not a good enough reason to ban fracking.
“The real reason to ban fracking is that it locks us into an energy infrastructure that is based on fossil fuels long after our country needs to have moved to clean energy.” He said that a Labour government would concentrate on developing a low-carbon energy industry.
The new policy goes beyond the Labour’s previous support for a moratorium on fracking until environmental conditions were met. It comes just days before a government announcement is expected on whether Cuadrilla should be allowed to frack at two sites in Lancashire in the North of England.
Francis Egan, chief executive officer, Cuadrilla said, “We are disappointed that Labour has reversed the positive view of shale gas it has held to date, without a proper Party debate. This runs contrary to the views of many of unions and Labour MPs who understand that it will play a vital role in ensuring Britain’s energy security for 80% of UK homes that rely on gas for heating and cooking and create much needed jobs and investment in Lancashire and across the UK.”
