This was a supporting detail page of the main policy document.
The UK has one of the most liquid and largest gas markets in Europe with extensive import infrastructure and a diverse range of gas supply sources. We are therefore well placed to manage gas supply risks. UK’s gas supply infrastructure The UK Continental Shelf (UKCS) is a mature basin and production is declining. Despite this, the UK remains one of the major gas producing nations in Europe and during 2013, gas from our own indigenous production was sufficient to provide just under half of our gas demand. Our import infrastructure has significantly increased over the past decade reflecting the predicted decline of the UKCS and as a result, we have increased the diversity of supply sources and routes to our market. This flexibility means that, if there is a problem with one source, we have other sources to call upon, and gas can be delivered from the cheapest available source. We source gas from North Sea producers, pipelines from Norway, Belgium and the Netherlands, and shipments of Liquefied Natural Gas (LNG) from further afield, as well as from gas storage. UK gas supply sources 2013 Our infrastructure is able to deliver over 700mcm of gas per day – well over double average winter demand (243mcm/d in winter 2013/14) and over 50% more than the highest single day demand we have ever had in the UK (465mcm). These diverse sources are capable of providing significant gas to meet the UK’s requirements and mean that UK gas market is resilient to all but the most extreme supply disruption events. There remains a risk of low probability but high impact events and the UK government takes this risk seriously. Gas storage Gas storage plays an important part in our gas system, but it is only one aspect alongside the import sources described above. Storage provides security of supply when demand is high, acting as a temporary balancing tool. Over winter 2013/14 storage withdrawal met 9% of our total gas needs, the remainder being met by other supply sources (Source: National Grid, DECC Energy Trends). Given the constraints to the rate at which gas can be withdrawn from storage, it is misleading to calculate how many days of storage we have at any one time: our largest storage facility, called Rough, is only able to meet around 10% of peak winter daily demand but could do so continuously for around 80 days if starting from full. Some countries on mainland Europe have more gas storage capacity than the UK but they don’t have the benefit of North Sea supply and our extensive range of import infrastructure. Pricing When demand is high and supply is not immediately available, prices rise to attract gas to the UK market. Higher prices are likely to trigger greater flows over our interconnectors with the continent or Norway, additional flows from storage, and attract LNG tankers to UK terminals. Retail prices of gas in the EU In recent months wholesale gas prices have fallen. While short term fluctuations in wholesale gas prices are unlikely to have a significant impact on consumers’ bills as energy suppliers buy gas on the forward markets gradually over time, which protects suppliers and thus consumers from the volatility of the commodity markets, we would expect that sustained changes in key fundamental costs are passed onto the consumer. Ofgem has referred the energy markets to the competition authorities to ensure there are no barriers to effective competition. The UK ranks favourably to other EU-15 countries with the lowest gas prices for domestic consumers, including taxes, as well as some of the lowest for industrial users in 2013 (Source; https://www.gov.uk/government/statistical-data-sets/international-domestic-energy-prices). We know many consumers are really feeling the pinch due to rising energy prices, however, and the UK government has policies in place to help consumers, particularly the most vulnerable. Multiple and significant losses to supply Ofgem’s 2012 Gas Security of Supply report found that in a normal winter we would have to lose 50% of non-storage supplies for there to be an interruption to gas supplies to large industrial users and/or the power sector, and between 60% and 70% of all gas sources for there to be an interruption of supplies to domestic customers - equivalent to losing all LNG supply, all imports from the Continent and 50% of our production at the same time. Nevertheless, in the unlikely event of a severe disruption to a number of sources of supply at a time of high demand, measures are in place to manage and minimise the potential impact on consumers. The owners and operators of the gas networks in the UK are required under established gas safety regulations to have adequate arrangements in place for dealing with supply emergencies. These arrangements aim to assure supplies to domestic consumers and to maximise an effective and timely response. As such industry is responsible for the operational management of the emergency and for notifying DECC as lead government department for the sector. DECC would then be responsible for providing the interface between industry, central government, and other European countries, and for ensuring the public were kept well informed. It would also be responsible for understanding and managing the wider consequences that may arise from a major gas supply emergency and may have a role to play in the use of emergency powers in the very unlikely event these were needed.