MARKET INSIGHT: UK Imports 45% by 2012
(Copyright © 2003 Energy Intelligence Group, Inc.)
World Gas Intelligence Wednesday, January 1, 2003
Spotting trends a day ahead is tough, so spare a thought for Britain's onshore gas pipeline operator Transco which annually publishes a ten-year UK supply/demand forecast to justify capital spending to its customers and regulator Ofgem.
Its latest Ten-Year Statement in mid-December sees a need to invest £1.06 billion-£1.55 billion ($1.7 billion-$2.5 billion) in its backbone National Transmission System (NTS) between now and 2011-12, including £200 million to build in extra 'resilience' (WGI Dec.4,p2). This January its first tender sale of long-term NTS entry capacity takes place, with a second following in August.
A separate division of parent National Grid Transco awaits a local planning decision in January on its application to build the UK's first LNG import terminal in 40 years on the Thames estuary 60 kilometers east of London, while a Dutch company's proposal in Wales may also get a decision then (WGI Nov.6,p1). Both "could play an important strategic role in securing future supplies."
But the crux of Transco's Statement is how to plan for a substantial rise in mostly Norwegian but also Dutch imports, as indigenous UK production declines. It expects the UK "to attract a large share of exports from Ormen Lange" due to start output off Norway in 2007 and produce 15 Bcm/yr-25-Bcm/yr. But it notes that "route(s) to the UK market are yet to be decided" while citing a "reported Norwegian government target" of 95 Bcm/yr [total] exports by 2015," from 50.5 Bcm in 2001 (WGI Nov.20,p6).
"Landfall of new imports is far from certain." However Transco includes possible UK new links to the continent, links old or new with the Norwegian offshore, and LNG imports. It forecasts that gas imports to the UK "will be required to meet one-third of all supplies by 2010 and approximately 45% by 2011-12" before cautioning "import dependency may well be higher."
Transco forecasts a 16% increase in annual gas demand in the period from now to 2011-12. Put another way Transco's 2001 throughput of 106.3-Bcm/yr (of which 13% exported to Ireland and mainland Europe) could, a decade from now, reach 120 Bcm/yr of which none is for export (WGI Feb.13,p3).
Peak day demand could grow by 20% over the same period. Growth in early years could be depressed by the slowdown in the manufacturing and gas-fired-power sectors, as well as by reduced exports to the continent and a more self-sufficient Ireland. But by winter 2005/06, it warns of "potential for a peak supply deficit" unless things like Interconnector compressors at Zeebrugge are implanted.
Over the decade to 2011-12, the gas share of UK primary fuel consumption is forecast to reach 46%, from today's 40%. This assumes closure of much coal-fired generating capacity, though this hasn't been Transco's recent experience. Wholesale electricity sagged this summer to £16 per megawatt-hour (MWh), continuing to deter gas-fired newbuild CCGTs: "The economics of new CCGT developments do not look favourable until wholesale prices rise to a level of around £24/MWh in 2005-06."
Higher gas prices last year caused some switching away. Gas was 37% of the generation market in 2001, compared with 39% in 2000. "Coal's share increased to 34%, from 31% in 2000, with nuclear increasing slightly to 22%."
Transco however believes that gas-fired will represent 80% of new-build power units installed in 2010, the date by when all older-design 'Magnox' UK nuclear power plants will have reached retirement. It foresees the amount of electricity generated by gas-fired stations to increase to 51% of total output by 2011-12, from typically around 40% now.
Nor is there likely to be erosion of the industrial and residential markets.
Despite rises of up to 37% in gas prices during 2001 to industrial buyers, the overall trend is for a gradual rise in gas use by industry, and away from other inputs. Meanwhile underlying growth in the residential market fell to 2% in recent years, as it is almost saturated with over 85% of homes are centrally-heated -- of those 75% by gas (compared with 45% in 1975).
Transco also cautions that 13% of its total NTS throughput in 2001 was exported to Ireland and mainland Europe: so NTS load profiles will need to take account of factors like when exactly Ireland's Corrib field comes onstream, and when a link offshore Bacton will enable more of Elgin/Franklin gas flows to by-pass the NTS and be routed directly to the continent. |
