Lower quality gas could be flowing through Britain’s pipelines this winter, with the Government scrambling to secure supplies amid an escalating global energy crisis.
The Business Secretary is discussing plans for less-efficient lower-calorie gas to be piped into the country’s networks, according to The Daily Telegraph, to make the most out of fuel available in the North Sea which would otherwise be unrecovered.
Officials are in talks over a long-term change that could take effect in coming months, although it the newspaper reports that Kwarteng is prepared to act under emergency powers if a faster decision is needed.
The developments reflect growing concerns in Downing Street over potential shortages and the evolving nature of the country’s energy policy following Russia’s invasion of Ukraine.
Last September, Kwarteng rejected requests from producer Neptune Energy to relax the rules, amid pressure to preserve the country’s green agenda in the run up to COP26 in Glasgow.
Since then, the Government has committed to further North Sea oil and gas exploration in its supply security strategy, initiated a new geological survey on the viability of fracking, and extended the life of a coal power plant through the winter.
Currently, the Government is weighing up the opening of a new coal power plant in Cumbria.
This follows warnings from the International Energy Agency this week that Europe should prepare for a full-scale cut off in Russian gas supplies this winter, with Russian President Vladimir Putin already enacting retaliatory measures in response to Western sanctions.
The Kremlin has already cut off supplies to Bulgaria, Finland, Poland, Denmark and the Netherlands, while also restricting supplies to Germany last week.
UK looks to insulate energy sector from Russia-Europe tensions
The UK only receives four per cent of its gas imports from Russia, but there are concerns about a significant knock-on impact if supplies to Europe are shut down.
Worst-case scenarios modelled in Whitehall suggest up to six million homes could face power cuts if that happens.
In a speech this week at the Chatham House Second Century London Conference, Kwarteng revealed the Government is exploring “potential regulatory options to extract more gas from existing fields” alongside further energy efficiency measures.
Ole Hansen, head of commodity strategy at Saxo Bank, told City A.M. a key issue for the UK was its lack of sufficient storage in case of supply shocks.
He said: “The UK has a reasonably developed ability to receive gas via LNG and together with pipelines from Norway it may end up in a less precarious situation. However, against this the UK has a limited ability to store gas underground, especially following the 2017 decision by Centrica to close its Rough storage facility in the North Sea after the UK government refused to subsidise costly repairs.”
Nathan Piper, head of oil and gas research at Investec, also warned that the UK’s superior energy independence to its European alliances would have no bearing on high prices in a global market.
“The UK has good security of supply through domestic production, Norwegian piped gas, LNG terminals and interconnectors with Europe, however this does not insulate the UK from price rises,” he concluded.