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LNG: Yesterday’s Saviour, Today’s Problem

In a bleak outlook for UK energy self sufficiency and security, the Chief Executive of Centrica, owner of British Gas Business, Sam Laidlaw warned:

“UK’s production of gas is falling rapidly.

“North Sea oil and gas output has fallen by 38pc over the last three years.

By 2020 we will be reliant on imports to meet 70% of the country’s gas needs. So when it comes to security of supply, there is a pressing need for solutions.”

Whilst this figure of 70% reliance on imports is not a surprise, the Minister of State for Energy Michael Fallon having raised the spectre of 70% in November; however it is the period over which this is expected to become a reality that has changed. Laidlaw believes this will be by 2020, some 10 years ahead of government projections.

That’s one target the government will absolutely not want to beat!

There is also an irony in this, our dependence on unstable regimes for energy imports has been of major concern in recent years and the advent of LNG, Liquid Natural Gas, imports was heralded as a bright opportunity for a more stable energy market. Indeed Centrica themselves are at the forefront of contracts to deliver gas into the UK via newly built LNG terminals dotted along our coastline.

But now this former saviour is seen as part of the problem.

Why is that? Simply put, LNG is something that needs to be brought in and cannot reasonably be controlled by our energy giants. In contrast the likes of Centrica would not only like to be less reliant on imports, they would like to be in control of the replacement generation.

Suddenly a foreign sourced product like LNG becomes less attractive when the UK landscape can potentially throw up its own natural solution, Shale gas.

The problem is that fracking, the process of extracting shale gas, has already got itself a bad name in the UK and organisations like Centrica or Cuadrilla need a renewed impetus behind it to make investment and development of a shale regime palatable to the government and nation.

It is claimed that over 1,000 trillion cubic feet of gas is potentially sitting under ground. Those are enticing numbers to Centrica and their peers.

That isn’t to say that Laidlaw doesn’t have a point about security of supply, it’s just that there are clearly other forces at work now a self-sufficient level of gas extraction is potentially available.

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