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Gas Storage

Energy and Climate Change – in the House of Commons at 10:30 am on 5th March 2009.

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Photo of Ann Cryer Ann Cryer Labour, Keighley 10:30 am, 5th March 2009

What assessment he has made of the adequacy of the UK's gas storage capacity; and if he will make a statement.

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Photo of Mike O'Brien Mike O'Brien Minister of State, Department for Energy and Climate Change

As North sea production declines over the coming decades, we will import more gas. That means that, for energy security reasons, we will need significantly to increase our storage capacity. National Grid's recent "Ten Year Statement" identifies 17 commercial gas storage projects in various stages of development, and another was announced last week. If all those projects go ahead, the UK's gas storage capacity could increase to some 20 per cent. of current annual demand levels by around 2020.

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Photo of Ann Cryer Ann Cryer Labour, Keighley

I am sure that my hon. and learned Friend is well aware that Centrica has announced one of the biggest gas storage projects in the UK. Given the present economic situation, is my hon. and learned Friend confident that such a massive project, which will require equally massive amounts of funding, is going to go ahead?

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Photo of Mike O'Brien Mike O'Brien Minister of State, Department for Energy and Climate Change

Yes, I am confident that we will get a number of these investments going ahead. Storage projects are major, long-term strategic investments for companies, and decisions about them are never taken lightly. The very fact that Centrica is seeking to bring forward that £1.2 billion project demonstrates that, although current economic conditions are, of course difficult, investors are taking that strategic view of the market. As I said, there are 17 other projects at varying stages of development. Gas suppliers have a legal obligation to supply gas daily, and the new storage capacities will enable them to have some insurance for that. We cannot be complacent: apart from the steps that we have already taken to ensure a supportive consenting regime for projects, we have also been working with the European Investment Bank and the gas storage industry to ensure that, if projects experience difficulty raising finance, the people behind them are aware of the facilities available at the EIB.

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Photo of Mark Harper Mark Harper Shadow Minister (Work and Pensions)

Mine is a largely rural constituency, and many of my constituents are not able to be connected to the mains gas network and have to use LPG instead. Will the Minister explain how the improvements in gas storage capacity will benefit those of my constituents who are not connected to the mains network?

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Photo of Mike O'Brien Mike O'Brien Minister of State, Department for Energy and Climate Change

To those who are not connected to gas, gas storage will be of limited benefit. We need to make sure that we create gas links that enable people to get on to gas. Across the country, and certainly in my area, communities are coming together, and local authorities have co-ordinated applications by communities to get connected to gas. That has worked very successfully. A number of companies are prepared to work with local authorities to do that. As for the hon. Gentleman's area, I recommend that he talk to his local authority and the companies, and get some of those projects going.

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Photo of Elliot Morley Elliot Morley Labour, Scunthorpe

My hon. and learned Friend will be aware that there is a real need for increased gas storage, not least because when prices were very high due to problems with Russian supply in Europe, gas from the Norwegian gas fields came straight into the UK and into the European market. An interconnector can be a good thing, but there has to be a genuine two-way process. Is he convinced that the European market is properly liberalised, and does not have protectionism, so that when we want to import gas from Europe, we can do so?

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Photo of Mike O'Brien Mike O'Brien Minister of State, Department for Energy and Climate Change

The straight answer is no, I am not convinced that we yet have a European market that is properly liberalised, but the European Commission is responding to concerns that the Government have repeatedly raised with it about the fact that we need change in Europe. We strongly support, and indeed have been a motivating force for, the work that is going on in the Commission to move forward EU energy liberalisation. There is a lot of work to do on the issue, but let me add that, as my right hon. Friend indicates, the issue is not just about gas storage. Companies have delivered a 400 per cent. increase in Britain's import capacity over the past 10 years. Pipelines including the interconnector, which he mentioned, have been expanded. There are new pipelines, such as the Langeled from Norway and the Balgzand-Bacton line from the Netherlands. The capacity for liquefied natural gas from the Isle of Grain has tripled to 9.8 million tonnes per annum. Britain's gas import capacity is equivalent to 120 per cent. of our annual gas consumption.

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Photo of Greg Clark Greg Clark Shadow Secretary of State for Energy and Climate Change

On 20 February this year—two weeks ago—Britain hit a new low, with just four days-worth of gas in storage in the reserve. Does the Minister consider that an acceptable margin for safety?

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Photo of Mike O'Brien Mike O'Brien Minister of State, Department for Energy and Climate Change

It is not about how many days worth of gas there are. The amount of gas in storage at a given point cannot meaningfully be assessed in terms of days. Stored gas is not used on its own to meet UK demand in any way. North sea gas reserves put the UK in a position unlike that of other countries. Yes, we need gas storage, and we will need to increase the amount of storage as our imports increase, but we still have a substantial amount of gas coming from the North sea. That means that we do not need quite the amount of storage capacity that other countries do, although we will need to improve gas storage capacity in future as North sea gas depletes and imports rise.

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Photo of Greg Clark Greg Clark Shadow Secretary of State for Energy and Climate Change

That is a remarkably complacent answer, because every country in the world is content to denote their storage in days—apart from Britain, apparently. For the second time in only four winters, we almost ran out of gas, and almost did not have sufficient gas to meet demand. According to a written answer that the Minister gave me only this morning, only the depressed state of the economy, due to the recession, saved us from running out. Even the official regulator thinks that we do not have enough storage. In the Energy and Climate Change Committee, my hon. Friend Miss Kirkbride asked the regulator whether he thought that enough storage was being planned, and he said:

"I am not happy to talk about this...we were hoping"— that storage would have doubled in the past five years—

"and we have barely moved."

Given that record, do we have to hope that this Government run out of time before Britain runs out of gas?

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Photo of Mike O'Brien Mike O'Brien Minister of State, Department for Energy and Climate Change

That is a stunning statement the week after Centrica announced a £1.2 billion proposal to create the second-biggest gas storage facility at the old gasfield in Baird in the North sea. We hope that that will come on stream from 2013. There are 17 other projects, too. That is one of the main areas for us, and the Government are setting out their priority of bringing gas storage on board. Let me be clear. The hon. Gentleman's claims that we were suddenly about to run out of gas take no account of the fact that the Norwegian gas fields were pumping vast amounts of imports into the country. We were therefore able to manage successfully and capably the issues that arose as a result of the recent cold snap and the Russia-Ukraine dispute.

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Photo of Joan Humble Joan Humble Labour, Blackpool North and Fleetwood

Is my hon. and learned Friend aware that just two years ago a proposal to develop a massive underground gas storage facility at Preesall just outside my constituency was overwhelmingly rejected by all the local people, both local councils, both local MPs, the planning inspector and, indeed, the Government, because of major concerns about the safety of the local population? I cannot ask my hon. and learned Friend to comment on the revised proposal that has been submitted, but will he assure me that the safety and security of our gas supply is not put ahead of the safety and security of our people?

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Photo of Mike O'Brien Mike O'Brien Minister of State, Department for Energy and Climate Change

These issues always need to be looked at in the round, to ensure that all the factors that need to be taken into account are taken into account. I am sure that that will happen as part of the process of assessing any application. It is always essential to ensure that communities are safe, but it is also important that as a country, for the protection of our energy security and our energy supply, we have sufficient gas storage. That is why the Government have made it one of their key priorities to bring on gas storage capacity in this country.

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Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

What recent estimate he has made of the volume of gas stored in the UK.

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Photo of Mike O'Brien Mike O'Brien Minister of State, Department for Energy and Climate Change

Last week saw increases in the amount of gas storage volume. As at 3 March 2009, the total volume of gas storage stocks in the UK was more than 1.2 billion cu m. The UK's total gas storage capacity is approximately 4.4 billion cu m. At this stage of the winter that is what we would expect—after all, gas storage is there to be used.

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Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

Notwithstanding the Minister's synthetic anger in response to the question from my hon. Friend Greg Clark, and as the rest of the world measures gas storage in days and the UK, at last measure, had 15 days, as against more than 100 for France and Germany, will the Minister agree to make regular statements to the House about the number of days of gas storage this country has?

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Photo of Mike O'Brien Mike O'Brien Minister of State, Department for Energy and Climate Change

The hon. Gentleman does not need me to make statements. If he goes to the National Grid website, he can find out every day. Let me be clear. Let us look at the country that people normally use in order to say, "Look, they have far more gas storage than the UK has." The country is Germany, which has about 25 per cent. of its imports covered by gas storage. The UK has about 25 per cent. of its imports covered by gas storage. We are covering ourselves adequately at present in terms of gas storage. As we increase the amount of gas imports, we will need to increase the amount of gas storage. That is why the Government are making it a priority, why we have encouraged companies to bring forward projects, and why they are bringing forward eight projects, including the very important one announced by Centrica last week.

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R

The minister is correct; these numbers are contained in an Excel spreadsheet, updated daily, available from:
http://www.nationalgrid.com/uk/Gas/Data/storage/

Submitted by Richard Taylor

Photo of Michael Clapham Michael Clapham Labour, Barnsley West and Penistone

The volume of gas that we have stored is bound to impact on domestic gas bills, but may I tell my hon. and learned Friend another reason for the increase in domestic gas bills? It happens when the units of gas in underestimated bills are aggregated in a catch-up bill and charged at the tariff that applies at the time of the catch-up bill. That results, of course, in an increased gas bill. Not many people know that the companies will recalculate, if requested. Does my hon. and learned Friend agree that when a catch-up bill is sent, there should be a note informing the consumer that they can ask for a recalculation?

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Photo of Mike O'Brien Mike O'Brien Minister of State, Department for Energy and Climate Change

My hon. Friend raises an important point. It is, I hope, one of the issues that Ofgem will consider as part of its overall review of energy companies' bills. Ofgem has expressed concerns about some of the ways in which billing has taken place, and I will make sure that my hon. Friend's point is drawn to Ofgem's attention.

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