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Gas Storage

Volume 488: debated on Thursday 5 March 2009

3. What assessment he has made of the adequacy of the UK’s gas storage capacity; and if he will make a statement. (260723)

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.

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?

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.

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?

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.

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?

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.

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?

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.

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 the Member for Bromsgrove (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?

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.

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?

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.

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.

Notwithstanding the Minister’s synthetic anger in response to the question from my hon. Friend the Member for Tunbridge Wells (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?

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.

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?

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.