Is Britain’s energy leadership failing?

"National energy leadership requires clear policy around investment to manage risk and investment, and a healthy balance between the market, and the consumer (taxpayer)?"

By: Nicholas Newman

National energy leadership requires clear policy around encouraging investment to manage risk and development, and a healthy balance between the market, and the consumer (taxpayer)?

The question of energy and especially its price has always been a politically sensitive issue. The question, is whether Britain's energy policy is failing? Many would suggest that significant parts of it already have. In fact, until recently, the United Kingdom did not enjoy an overarching energy policy framework; instead it depended on guidance from European energy policies for much of the day-to-day implementation of operational issues. In a sense, what there was of a discernible British energy policy was merely an incomplete jigsaw. What is certainly clear is that successive British governments have failed to demonstrate “responsible” energy leadership.

Some successes

Britain can certainly be proud of its successes largely due to the result of responsible leadership back in Brussels and not here in the UK. Such successes include the ban on old-style light bulbs, the backing of the use of biofuels in petrol, the introduction of carbon trading, the scrapping of ageing coal power stations, together with the introduction of smart meters in homes and energy-efficiency labels on domestic electrical goods. In addition, the introduction of more energy efficient domestic goods has certainly benefited the consumer’s pocket and in the case of cars, has reduced pollution in our cities.

Some disappointments

However, despite these advances there are still grumbles, not only from consumers, but major players in the energy market. From an energy security perspective, the actions taken to encourage investment in renewables, has only had a marginal impact on slowing down the UK’s reliance on imported fossil fuels such as coal, oil and gas . [1] [i] In 2010, the cost of energy imports contributed to around 15% of the UK's then trade deficit. University of Lancaster’s environmental researcher Oluwabamise Afolabi, reports that the DTI in 2007 projected that UK natural gas imports will increase to 70% by 2017 and imported coal could be meeting up to 75% of the UK coal needs by 2020.

Certainly part of the reason is that the EU energy policies have not gone far enough in the implementation of its ambitions for a single energy market for the continent, whilst we do have a single market for bananas! A single market for energy would certainly help meet many of Europe's energy security concerns and hopefully facilitate greater competition Europe-wide. In the UK, there is a serious need for more energy suppliers actively competing in the market. At present, for instance the gas and electricity market is dominated by six major players, so it is not surprising we suffer high power prices.

Lack of leadership?

Nevertheless, the current government has preserved the vacuum in clear policy ownership and focused leadership left by its Labour government predecessor. This is demonstrated by the recent fiasco of the U-turn over feed-in tariffs [1] [ii] for solar power [1] [iii] and the failure to encourage investment in insulation for buildings with solid walls. The government’s decisions over feed-in tariffs plunged the rapidly growing job-creating solar power installation industry into crisis at a time of high unemployment. It is clear that senior policymakers made a decision without clearly understanding the full impact it would have on Britain's solar power sector.

There seems to be a lack of leadership being exhibited by ministers on energy policy by many in the governing coalition. We are seeing, increasing opposition in Parliament by Conservative MPs, but also by members of the public towards the government’s ambitious support for new wind power projects throughout the country. In January, 101 Tory MPs wrote to Mr Cameron, calling for onshore wind farms subsidies to be “dramatically cut” – well beyond the 10 per cent reductions already in the pipeline. In addition, there have been protests about new renewable energy projects across the UK, together with concerns about the increasing number of people being plunged into energy poverty due to the shambolic energy taxes and subsidy system. Overall, current subsidies paid out to renewable energy producer’s amounted to some £1.5 billion a year, of which £400 million was given to companies operating onshore wind farms, reports the Telegraph in June 2012. However, DECC reports that renewable energy subsidies are costing each British household around £103 per year and between 2004 and 2010 electricity prices rose by 60% and gas bills by 90%, noted DECC.

At a strategic level investors are increasingly concerned about the sense of drift on energy policy towards new investment by the current government towards various types of generating technology, many large-scale investors are complaining that they are not getting sufficient encouragement to move ahead on meeting the government's ambitious programme to replace time-expired coal and nuclear power stations with new generating capacity from both traditional and new generating technologies.

Failing to identify risks

It also appears that the government appears to be failing to identify and manage risks and plan for such unforeseen events as natural disasters, supply disruptions and wars. There appears to be a lack of long term preparation against supply disruption, this can be seen from the following issues. At present, we have limited interconnector capacity amounting to just under 5% of UK generating capacity, is made up of high voltage undersea power cables linking Britain with France, Belgium and Holland. For energy security reasons the UK needs to double such capacity. Once completed Britain will be better able to balance shortfalls in renewable generation here with imports from elsewhere in Europe.

Then there is the question of gas security, Britain only has 3.3 bcm, equivant to 14 days of gas storage capacity available in theory, reports DECC, and much of that is reserved for storage capacity for other nations in Europe. Unfortunately, there are no reciprocity agreements to such storage capacity that is located in the UK with foreign owned companies at present; I was surprised to learn from an energy trader recently. Though there are ambitious proposals to increase gas storage capacity, given sufficient government support. Unlike France and Germany, which have at least one month gas storage capacity? Currently Britain imports 24% of its gas from Qatar. This apparent lack of direction and foresight can also be seen in the relatively low large-scale electricity storage capacity of only 20 GW hours: perhaps sufficient to replace current UK wind generating capacity for just two hours if the wind failed to blow.

In addition, unlike several other European countries Britain has failed to move ahead with pilot carbon capture projects. The realisation of carbon capture technology could aid Britain in its ambitions to further diversify its current sources energy, as coal is available worldwide in easy to reach commercial quantities including Poland, USA , South Africa and Australia.

There are increasing fears that Britain could face power shortages by end of the decade, unless urgent action is taken to construct sufficient new generating capacity to meet growing demand. I would hate to think Britain consumers will face in the future the prospect of regular power cuts, as is the case of Nigeria today.

We are also seeing a lack of realism, amongst policymakers into the impact of their policies. One of Europe's and U.K.'s ambitions is to reduce reliance on gas imports. Unfortunately, the government’s neglect of creating a proper framework for reducing gas usage for power generation purposes is encouraging a reliance on this fuel source to back up for the variability of renewables. Which could raise interesting energy supply and security concerns for large scale consumers such as hospitals and railways that rely on 24/7 energy supplies.

Since 2004, the UK has been a net importer of gas, as domestic production has declined and the country’s power sector has switched to gas for power generation purposes [1] . Since the winter of 2009, the UK has depended for half its gas needs on imports. Current government policy neglect is encouraging reliance on imported gas to remain at present levels whether imported from Norway, Russia, Nigeria or Qatar. As Britain's reliance on renewables increases we are going to see imported gas-for-power generation purposes providing a backup to wind energy projects when the wind fails to blow, because Britain has not invested enough in sufficient gas and electricity storage capacity and expansion of its interconnection links with the rest of Europe.

Danger of short term thinking

Overall, Britain's energy policy is in danger of suffering from short term thinking, which might be building up new problems for the future that might prove expensive to solve. In other areas, there is much to be proud of, but it is clear much more needs to be done. In addition, there has to be greater dialogue between all stakeholders involved in energy policy so that Britain develops an affordable, reliable and secure energy sector that meets our economic ambitions for growth.

Conclusion

However, the government needs to demonstrate responsible energy leadership and move actively forward on implementing many of its ambitions quickly, such as starting construction on new nuclear power stations, stop dithering on proposed coal and carbon capture projects and encourage investment in new energy storage capacity. Nevertheless, the emphasis on energy policy should be rebalanced more in favour of the consumer and taxpayer, by enabling users near such projects to directly benefit from the profits of such schemes.

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[1] [i] DECC aims for at least 15% of UK energy mix to come from renewable sources by 2020 if current levels of investment are maintained.

[1] [ii] A feed-in tariff (FIT, standard offer contract or renewable energy payments) is a policy mechanism designed to accelerate investment in renewable energy technologies. It achieves this by offering long-term contracts to renewable energy producers, such as home owners, it is typically based on the cost of generation of each technology. Technologies such as wind power, for instance, are awarded a lower per-kWh price, while technologies such as solar PV and tidal power are offered a higher price, reflecting higher costs.

[1] [iii] Solar power is the conversion of sunlight into electricity, either directly using photovoltaic (PV), or indirectly using concentrated solar power (CSP).

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[1] In 2010, 34 per cent of natural gas demand (371 TWh) was for electricity generation reports the DTI.

Dziennikarz Specjalizujący Się W Energii Jestem dziennikarzem z Oksfordu, specjalizującym się w energii. Piszę o wszystkich aspektach biznesu energetycznego, tj. wydobyciu, produkcji, inwestycjach, rynkach, technologii, regulacjach prawnych i rynkowych, tworzeniu zasad jego działalności, kierownictwie i zarządzaniu.

Specjalizuję się w dziedzinie energii ropy i gazu na lądzie i w wodach przybrzeżnych. Dodatkowo, dla moich klientów korporacyjnych, dostarczam kopie na piśmie. Jestem do dyspozycji (wg prowizji) do wielu różnorodnych prac dziennikarskich. Od 2000 r. jestem wydawcą „Oksfordprospect magazine”, regionalnego miesięcznika biznesowego, gdzie można znaleźć aktualności z dziedziny energetyki oraz przykłady moich prac dziennikarskich na inne tematy. http://www.nicnewmanoxford.com/Dziennikarz-Energii.html

NICHOLAS NEWMAN Energy Journalist

I am an international energy journalist located in Oxford, England with a comprehensive contacts-book of leading energy industry professionals and academics to draw upon. I specialise in the following topics: oil and gas exploration and production together with power generation, including renewables and nuclear.

Much of my energy writing is concerned with trends in policies, risks, exploration and production technologies as well as trading in energy resources. This includes, for instance in the gas sector, all aspects  of  current market policy, political and technological trends and developments that may affect the exploration, production and trading in natural gas, shale gas, CSG and LNG.

In addition, I often have to examine and analyse shifts in the terms of trade between coal, gas and oil as they are affected by structural market changes or opportunities and policy developments. For instance, there is the move towards deeper waters for offshore oil and gas production which is turning countries like Brazil and Angola into energy giants.

A unique contribution of my writing is to provide a geopolitical insight into the emerging energy challenges that face investors, consumers and decision makers. My main asset is my ability to turn clients’ complex and technical and financial stories into compelling narratives. My writing provides a gateway for investors and decision makers to comprehend the often complex issues that face the energy sector in a given part of the world, for example, the recent developments in Kazakhstan.

I regularly  investigate  emerging market demand and supply and how different solutions are being applied to common problems such as, adoption of environmental regulations and laws by Arctic nations’ following  Norway’s lead in exploiting the Arctic Ocean oil and gas resources sustainably. I am well versed in researching, analysing, and sourcing my publications from a broad range of international, national, local and online business press and corporate clients. I am available for both short pieces of 750 to 1000 words and long pieces up to 5,000.

In addition, I have undertaken technology reviews and assessments. Most recently , I have supplied analysis about the viability of Russian government  innovation policies for Engineering and Technology Magazine, a survey and assessment of exploration  technologies for Petroleum Review and an investigation of Australian clean coal carbon capture technology for Power Engineering International.

Furthermore, I have conducted market analysis for investors seeking to participate in the Indonesian and Italian energy markets for Power Engineering International and Oxford Prospect.  I have also written promotional material for such companies and organisations as NES Global Talent, Primafila AG, Centrica, Media Consulta, Net Resources International, Siemens AG and the European Commission. One of my most recent clients has been international engineering recruitment consultants NES Global Talent for whom I produced a set of innovative case studies for their corporate web site.  

Currently, I am  investigating the reasons for the spectacular failures that the global energy sector seems to experience on a recurring basis. For instance, there are  such tactical failures as occurred with BP's Deep-Water Horizon and Japan's Fukushima Daiichi nuclear crisis, as well as  strategic policy failures such as the UK’s  Green Deal Initiative and the first phase of Europe's Emissions Trading Scheme. I am planning a series of “responsible energy leadership” Workshops which are to be held in Oxford, London and Dubai with the co-operation of London's Energy Institute. These three hour workshops will be attended by industry professionals, academics, regulators and policymakers, who will come together to explore the requirements of “Energy Leadership” in situations of crisis and chronic failure. To contact Nicholas Newman

A crisis in leadership in Japan's nuclear industry.

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By:Nicholas Newman



Failing to make the right decision is easy to do. Regrettably, despite years of technological progress and experience, governments and energy companies continue to make such mistakes. Nevertheless, due to the increasing scale of investment and environmental hazards that the industry faces, the world energy leadership needs to do better than it has in the past.

If it is clear those events at Japan’s Fukushima Daiichi nuclear plant have as much to do with bad decision-making by the country's energy leadership as it has to do with the massive sea quake that caused a tidal wave to hit the doomed nuclear power station. Examining the factors that contributed to the poor decision-making that led to disaster in Japan last year, one comes to the conclusion that the events transpired could have been substantially mitigated or even avoided by the country’s energy leadership.

Here are some of the reasons that contributed to Japan's unpreparedness for such a nuclear crisis and surprising negligence of nuclear power plant safety standards. These factors that contributed to the Fukushima incident range from internee sign fighting between the country’s government agencies (Ministry of Environment and its two regulatory agencies the Nuclear Safety Commission and Nuclear and Industrial Safety Agency) as well as the plant’s owners Tokyo Electric Power Co. Nor did it help that the power plant's operator had been found to have ignored safety advice on several occasion from both domestic and international nuclear professionals such as the International Atomic Energy Agency (IAEA).

It is clear from government reports that the leaderships of various stakeholders in the industry, including Japan's regulatory agencies and nuclear power station operator TEPCO made serious errors which would have been avoided if the organisational culture was more accountable and open to inspection to not only Japan's voters, but also the international community at large.

For instance, there are several documented examples of the national regulatory agencies ignoring the advice of such world agencies such as the IAEA. Reports suggest that the regulatory system was suffering from turf wars and intra-agency rivalries between regulatory agencies and departments of government ministries.


Nor did it help that TEPCO falsified safety records and ignored the advice given to it by both the domestic regulators and the International energy agency revealed in a report by Japan's Independent Investigation Commission. In this report, it was revealed that Japanese electric power companies had since 1980, been unwilling to cooperate with the IAEA 's operational safety review of the country’s power plants. This review known as the Operational Safety Review Team (OSART), is where a team of experts conduct an in-depth review of operational safety performance at a nuclear power plant by checking the factors affecting safety management and personal performance.

In 1992, this operational safety review of Fukushima made a number of recommendations which Tokyo Electric Power Co, subsequently dismissed. In 2002, it was revealed that TEPC had falsified 29 cases of safety repair records regarding cracks found at several of its nuclear reactors, including those at Fukushima Daiichi in the late 1980s and 90s. Despite this, the power company declined the offer by the IAEA to institute a fact-finding process to improve safety at the plant concerned. It was announced by the Chief Executive at TEPCO, that the proposed regulations were unrealistically strict and not in accordance with actual operational requirements.

Nor did it help that the entire nuclear community of the country was suffering from isolationist and secrecy tendencies, which were not helped by delusions that the country's nuclear power sector was the best regulated, most advanced and managed industry in the world. The perception amongst many Japanese nuclear professionals was there was no need for Japan to learn from the rest of the world. In a sense Japan's nuclear community was suffering from classic Galapagos Island syndrome symptoms.

Much to the surprise of these professionals the events at Fukushima were a wake-up call; it became clear from various investigations that Japan's nuclear power sector was rotten to the core. It became clear that the industry was totally unprepared for the crisis when it occurred and was not able to provide solutions to such a crisis. It did not help that many of those civil servants working in nuclear regulation and safety management, did not have the opportunity to develop long-term expertise in the subject, because of the practice of regularly rotating civil servants to other government ministries. In addition, it did not help that findings found that the regulators were not truly independent of the power companies they were supervising.

Unfortunately, breaking out of the Galapagos syndrome for Japan's nuclear sector is going to prove hard task. Japan will need the help of the international community to create a new decision making energy leadership culture so that it equips it with the tools to avoid such complacency and a repeat of such disastrous mistakes. There are plans to establish a new, powerful nuclear safety agency this summer that will replace the old agencies and ministerial departments. Unfortunately, many of the new staff for this new agency will come from the failed organisations that contributed to Japan's nuclear disaster.

However, perhaps the best way to revolutionise Japan’s nuclear community is if it imports new leadership and experts from abroad, until Japan has trained up the necessary recruits in the standards of the world nuclear community. Unfortunately, foreign CEOS leading Japanese companies are rare and tend only to stay a short time due to inherent organisational resistance to change. In addition, Japan, the country finds very difficult to change its organisational culture, given the extremely conservative, traditional nature of its society. This is despite its appearance as one of the world's most technologically advanced nations. This can be seen by its failure to implement the radical changes required to break the country out of economic stagnation in recent years.

Japan's government wants to restart two nuclear plants to avert summer power shortages this summer, but public skepticism of nuclear safety and the industry remains high. Before March 2011, Japan depended for 30% of its power from nuclear power plants. Unless Japan can make the necessary changes it is unlikely there will be public support for the country’s nuclear power stations to start operating again. Instead the country’s energy leadership will have to continue to depend on expensive renewables and imports of gas from Australia to fuel its power sector in order to maintain energy security.

See also East Asia - a nuclear hotspot?

Japan's natural disaster will boost demand for LNG imports.

Power Sector Troubles in Southern Europe!

Times are tough for the power sector in Portugal, Spain, Italy and Greece. Troubles with the euro are forcing governments to cut back on investment and subsidies for power generation and increase power prices in Southern Europe. As a result, dreams to achieve energy security are increasingly a more distant prospect as the investment climate becomes more difficult for investors to achieve such ambitions. In Spain we have seen the government look with more interest at the possibility of shale gas in the Basque country and offshore drilling for gas in the Canary Islands, providing a new solution for its power sector. However, in Italy, the failure of Berlusconi's dreams for a nuclear Italy mean that, renewables will play a greater role in fulfilling Italy's energy security prospects. However, in all the countries concerned energy policies will be limited by fiscal constraints and political uncertainties.

http://www.oxfordprospect.co.uk/Italy-Power-Review.html

Latin America and uncertain place for investors despite its economic growth.

Last week was bad news for foreign investors in Argentina; the question is, will investors in other Latin American countries face similar uncertainties. Currently, countries such as Brazil, Chile and Colombia are experiencing rapid growth, which is viewed with envy by many Western governments. However, like in other prosperous countries throughout the world, the problem of providing secure and affordable, sustainable power supplies is never-ending.

Many countries in the region have opted for Hydro solutions which have met with opposition from environmentalists; others are looking at traditional solutions such as coal and gas. However, some countries have begun to take a late interest in exploiting none Hydro renewable technologies such as solar, geothermal, wave, tidal and wind. Already we've seen Brazil rapidly turned round its power sector so it is no longer the region’s Nigeria when it comes to affordable power supplies.

In Argentina, we are likely to see the countries desperate need for power to be solved in part by the recent discovery of shale gas deposits in the north-west of the country. However, how rapidly it can utilise such discoveries will depend on how all Argentina is viewed by foreign investors, as a result of the recent partial nationalisation of Spain's Repsol. This feature will look at the activities of investors such as International Power and technology providers such as Siemens in providing solutions to meeting the regions power sector needs.
Contact www.nicnewmanoxford.com

Do you need an energy journalist with an excellent track record of providing copy for the energy sector?

Do you need an energy journalist with an excellent track record of providing copy for the energy sector?  Do you need relevant and engaging copy for your website, newsletters, features, whitepaper, reports, press releases and other related copy?  Nicholas Newman is an energy journalist with a thorough grounding in energy writing and a sound understanding of the current energy markets.

For the latest example of my published work see http://www.mydigitalpublication.com/publication/?i=100971&p=38 and other work see http://www.oxfordprospect.co.uk/Portfolio.html

To find out more about me http://www.oxfordprospect.co.uk/Energy-Journalist.html

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Regards

Nicholas Newman

Forecasting the future of UK gas supplies

"A concern for gas security "

By: Nicholas Newman
Forecasting the future is always full of uncertainties, there are too many doubts such as Black Swan's, banana skins and acts of God that can make a forecast disastrously wide of the mark. Well despite all these afford mentioned uncertainties, a group of Britain’s leading industry gas experts were precisely trying to predict the future of gas supplies for the UK at the behest of OFGEM, at a seminar held on 2 February 2012 at London’s Institute of Mechanical Engineering. Amongst the questions asked were the following:

· Where will future gas supplies come from?

· Will there be sufficient gas around and how much will it cost?

· Does Britain need more gas storage capacity?

· How stable will gas prices be and how secure will gas supplies be?

· Is the UK becoming dangerously vulnerable to the dependence on imports of gas supplies from Qatar?

· Will America start export gas from 2014 onwards?

In the past the main concerns for Western Europe were doubts about the price, availability and security of supplies of Russian gas to the European Union. In the future, Howard Rogers at the Oxford Institute of Energy Studies suggested that other factors including:

· Future developments in American gas production, especially the growth in shale gas production,

· Asian and European competition for Qatari LNG gas deliveries, especially as Britain becomes increasingly reliant on gas shipped from Qatar.

· The timing of the start of US gas exports to Europe. Already, traders have factored the arrival of forward European gas prices, which at least in the short term should depress the cost of wholesale gas prices for a short while. Alistair Buchanan Chief Executive of OFGEM has suggested that by 2014, the United States will be ready to export its surplus shale gas production to Europe, once it's LNG import terminals on the East Coast and Gulf of Mexico have been converted to LNG export terminals, which include the proposed plants at Corpus Christi Texas and the Cove Point unit in Maryland. However, the prospect of US gas exports to Europe is still not yet a done deal with the current Obama administration, due to the American government’s own concerns to achieve long-term energy independence.

· However, Alistair Buchanan, noted that America’s ability to export gas, will also depends on how quickly U.S. regulators push for a switch from coal to gas power for electricity generation and how quickly its economy grows in the coming years.

While Anne-Sophie Corbeau at the International energy agency suggested other factors will have to be added into Britain's gas supply equation. These include:

· The security of gas supplies from the world's leading LNG gas exporter Qatar, given that its northern neighbour is Iran. The latest UK government figures suggests that Qatari LNG imports amounted to 52% of the total gas consumed in the first nine months of 2011; this is up from 11% in 2009 as a whole. The trouble Britain is that Qatar not only exports to Britain and other European states, but also to Asian states such as China, South Korea and Japan. We've already seen as a result the closure of several Japanese nuclear power plants a spike in the price of gas has as Japanese power produces and switched to imported gas to make up for the loss of nuclear power generating capacity. In future years we're likely to see growth in gas prices due to the increasing demand for gas Asian power generators as their economies continue to grow. This will mean Qatari gas become an increasingly expensive proposition for European gas consumers.

· The growth in Asian demand for gas imports and the impact that nuclear power station building programs such as in China are likely to have on the growth of demand for gas.

It is not surprising that Britain is looking desperately for alternative gas supplies, such as American shale gas exports, development of shale gas in Europe and even by the end of the decade imports of gas from Australia.

In addition, Poyry energy consultant and expert on shale gas Lucy Fields has pointed out that due to various difficult environmental, legal and geological factors, Europe is unlikely to experience a repeat of the American shale gas revolution. Instead, the arrival of shale gas production is likely to be more modest in impact. In addition, some expressed that once Australia's supergiant offshore gas fields become fully operational such as Wheatstone and Gorgan, Britain will be able to import LNG gas from there.

Lastly, this seminar total to the issue of what is energy security, Pierre Noël from Cambridge University’s Electrical Policy Research Group, defines energy supply security as the ability of the energy system to meet contracted final energy demand under a gas supply disruption, at peak time. However, risk adverse politicians tend to not trust the ability of the international markets to top up supplies as required. Also, for political and economic reasons, they are against sudden price spikes caused by disruption to supplies, even though economists will regard such market developments as an efficient method of rationing gas supplies. Instead, our political energy leaderships will seek methods to reduce the potential for such disruptions will have on gas supply availability. As a result, of the disruptions caused by though Russian Ukrainian gas disputes, European Union member states adjusted the market conditions in Europe to encourage greater cooperation between operators and increased capacity for storage, in order to insulate europe’s gas market against such emergencies. Such proactive action was much to the annoyance of Europe's gas suppliers such as Gazprom and Sonatrach, since such developments weakened such producer’s ability to influence the market.

In Britain, there has been much political concern that Britain has insufficient gas storage capacity. Though, many market operators would disagree. The UK’s current storage capacity amounts to only 14 days’ worth of gas supply—a dangerously low level compared with France which has 87 days’ worth of gas storage, Germany 69 and Italy 59, according to last December’s report by MPs on the Energy and Climate Change Committee. However, the reality is not as clear-cut as it initially appears. It has been argued by some energy analysts that the reason gas storage capacity has not been significantly increased in recent times are because of the following factors:

· Britain has massive gas import capacity, via its interconnector’s with the continent, especially the Norwegian gas fields.

· Also, due to developments at Milford Haven in Wales and, the United Kingdom has significant LNG import capacity.

· Further, there is sufficient capacity to cope with most peak time disruption scenarios in the years ahead.

· UK security of supply relies on its ability produce some gas itself and its ability to import gas from both European and global markets.

Unfortunately, in Europe's efforts to increase gas price competition by weakening the influence that oil price indexation has on Europe's wholesale gas prices. Europe is likely to face increased price and supply volatility as increasingly gas supplies will be obtained on the spot markets rather than through long-term contracts.

In order to improve their U.K.'s ability to withstand gas supply disruption the government has given the go-ahead for Gateway Storage Company to construct a new offshore gas storage facility, not far from Barrow in Furness in Lancashire. Once completed, the undersea caverns will have a working gas storage capacity of 1.52 billion standard cubic metres (~562 million therms), adding nearly 30% to the current UK gas storage capacity. Once this facility is completed in 2014, the United Kingdom should have a similar storage capacity for gas equal to that of Holland and in the longer term investors have plans to double the U.K.'s current storage capacity, equally that of either France or Germany.

This seminar was part of OFGEM's first major effort to gather industry views on the UK's gas supply prospects following the DECC request last year, an OFGEM spokesman said. However, what this seminar revealed was the major differences between gas producers, traders, consumers and regulators about the future course of UK gas supplies. It also revealed how black swans such as the arrival of the American shale gas revolution was unforeseen by many experts just a couple of years ago. Though, I suspect a future black swan will be the impact that the Arab Spring will have on Europe’s future gas supplies.In addition, the debate in the question-and-answer sessions revealed how successful acts of God such as European energy policy has been on affecting the growth in demand for gas and how the market can be made to operate to meet the greater good of the economy. As for banana skins, the un-intended consequences of the drive to the index gas prices from oil prices is a good example. In the long term, it looks like European gas prices will continue to increase, due to increased demand by European, Asian and American power generators. However, the real question is, where will Europe be obtaining its future gas supplies. I would not be surprised that the European Union will be developing new gas fields in the Arctic regions in the long term.

For details of the slides used in seminar see:

http://www.ofgem.gov.uk/About%20us/PwringEnergyDeb/Pages/PwringEnergyDeb.aspx