A 'Perfect Storm' Of Energy Issues To Concern Boardrooms
The timing of an event in London this week brought into stark focus the many ramifications for UK business and the supply chain of current tensions with Russia over the nerve agent attack in Salisbury.
The day after the Natural Resources Forum held a conference at the London Stock Exchange entitled 'The Great Gas Reconfiguration: Pipe-dream or Reality?', the Financial Times ran a story that said half of Britain’s imports of liquefied natural gas so far this year have come from Russia. The country has accounted for three of a total of six LNG shipments that have arrived since early January in the UK, according to the paper.
"The UK cargoes have shone a spotlight on the UK’s increasingly import-dependent energy strategy, with declining North Sea output and limited storage in the country" said the FT.
David Knipe, Head of International Gas at BP, said at the conference: "By 2040 it is predicted we will have the biggest mix of fuels the world has ever seen." He revealed that six of seven projects undertaken by BP last year were gas-related.
While LNG imports currently equate to a small portion of UK gas demand (3%-5% so far in 2018), they are expected to grow, and the NRF conference with an impressive line-up of speakers painted a picture of geopolitical and commercial concern.
Professor Jonathan Stern of the Oxford Institute of Energy Studies reminded the audience that many large pipelines are from Russia and LNG will account for 90% of new gas until 2040. He spoke of fragmentation in the market as disparate commercial interests divide the industry over value chain co-operation.
Francis Egan, CEO of Cuadrilla, discussed the UK shale gas opportunity as Cuadrilla is due imminently to complete drilling on its first well. Hugh Carmichael, Director Feedstocks Trading and Shipping, INEOS, talked about helping to deliver US shale gas effectively and economically to mainland Europe. INEOS, described as the "biggest company you never heard of with $60bn turnover" recently signed a contract to partner and build the largest butane river barges ever used in Europe.
There were many speakers, not all mentioned here. The panel discussion was under Chatham House rules.
A presentation by Paul Corcoran, CFO of Nord Stream 2, jumped out for attention. His argument was seemingly straightforward and went like this: there is a gas supply issue within Europe, and domestic supply cannot deal with the problem. Europe will need to import gas in the future, which can only be supported by Russian LNG. The important thing is to "enhance the security of Europe's energy" he said.
But as the FT also reported this week: "While markets have focused on the escalating UK-Russia stand-off over the poisoning of former spy Sergei Skripal and his daughter, Russia’s Gazprom is engaged in what is being called a “new gas war” with neighbouring Ukraine."
Read the story for the further complications - including the possiblity that Nord Stream 2 may yet be blocked by the EU.
Those who thought the stop-start progress in implementing Brexit was making it impossible for many boardrooms to function might also want to consider the debate on where and how we get our energy.
The Met office has just predicted another period of snap cold weather, with widespread disruption to travel and functionality. The last time this happened a few weeks ago, we had the National Grid warning that it was in danger of running out of gas, and needed the market to step up and provide more. Prices rocketed at the National Balancing Point gas market, the virtual hub that serves as the main pricing point for UK natural gas.
The impact of earthquakes has been another factor in limiting supply, as it has forced a decline in Dutch Gas production, as explained to the conference by Volko de Jong, managing partner at the Global Gas Initiative. While he agreed that the role of Russian Gas and LNG would become even more dominant, he stressed that The Netherlands would accelerate its ambitions towards sustainable energy.
I understand videos of the presentations at the conference will be available on the NRF website next week.