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Energy: Imported Gas

Volume 700: debated on Wednesday 23 April 2008

asked Her Majesty’s Government:

What steps they are taking to limit the United Kingdom’s dependence on imported gas.

My Lords, the Government have established an appropriate regulatory and commercial framework to encourage diversity of the energy mix, including renewables, nuclear and coal. Meanwhile, the market is bringing forward a substantial increase in our gas storage capacity to offset the decline in flexible gas production from indigenous sources. Our energy efficiency measures will also help to reduce the need for gas imports.

My Lords, I thank the noble Baroness for that Answer. Does she accept that on present trends, the UK’s imports of gas could rise to 80 per cent by 2020 and that this would present an entirely unacceptable security risk, bearing in mind that at our present much lower levels of imports, there have been reports of diversions of supplies destined for this country? In those circumstances, should there not be an intensification of the efforts to which she referred, notably to increase the amount of gas storage capacity, greater efforts to save energy and the development of alternative energy sources?

My Lords, 80 per cent is at the higher end of the estimate. As the energy White Paper set out, we are looking at a range of between 60 per cent and 80 per cent. If we implement these measures with the intensity rightly pointed to by the noble Lord, we will be able to reduce our dependence on gas imports to around 60 per cent. Gas storage capacity is indeed the key. A further 1.2 million cubic metres is under construction with another 8 million cubic metres being planned, and we have improved our import infrastructure to three and a half times the 2005 level.

Oh, come on. Has the noble Baroness’s department been given the same message as I have received that unless some of the potential investors in new nuclear build get the consents and permissions they need in time, they are going to have to invest in more gas-fired power stations in order to help to keep the lights on? Is that what the Government want?

My Lords, we are engaged in intense discussions with all of the nuclear developers about the consents that they need and we believe that the processes with health and safety regulators and planning bodies are on track. However, we are being vigilant on this count.

My Lords, what is the Government’s attitude towards the Nabucco pipeline project to bring natural gas into Europe via Turkey? Would this not be a useful alternative to supplies from Russia?

My Lords, I should make it clear that at present we do not have any direct sources of supply from Russia. We have diverse sources of supply from Norway, other parts of Europe and Algeria. Indeed, we now have a direct pipeline from Norway and liquefied natural gas is coming into the new LNG terminal.

My Lords, does the Minister have confidence in the contracts for importing LNG given the decline in natural gas resources in America and the fact that two years ago LNG tankers en route to Britain were diverted to America to meet its demand?

My Lords, I obviously cannot comment on individual cases but the diversion of tankers is a matter of contract rather than a matter of the tankers. The LNG market has been growing rapidly and is becoming the swing factor in the market in terms of supply and demand.

My Lords, I am grateful to noble Lords. It is seldom that I find myself so popular. The Minister has rightly said that we need to have a substantially increased gas storage capacity in this country and she mentioned the large increase which is planned. When does she envisage that will be introduced and operational?

My Lords, facilities, with a capacity of 1.2 million cubic metres, are currently under construction and are due shortly. The rest are dependent on planning and development. I therefore suggest it will be as soon as we get the Planning Bill through.

My Lords, is the noble Baroness aware of the statistic from the National Grid that if daylight saving had been incorporated in the Climate Change Bill it would have saved the equivalent of one nuclear power station. If daylight saving were implemented, how many gas-fired power stations would not have to be built? If she disagrees, can she produce, with the parties opposite, coherent statistics to show that not having daylight saving actually saves energy?

My Lords, the only reliable statistic that we have for energy efficiency is that it could lead to a 2 or 3 per cent reduction in the dependence on gas. But, given that electricity needs gas and gas is also needed for heating, it is not a pound-for-pound saving.

My Lords, is my noble friend aware—I am sure she is—that people have been prophesying doom and gloom about running out of energy supplies in this country for the past 150 years? This has been led by economists, I regret to say. Is she not aware that, on the whole, world energy markets work very well indeed and there is not the slightest doubt that we will be able to obtain the energy supplies we need? That is not to say that we should not build a new nuclear station, but it is not fundamental. What is fundamental is that we should appreciate that in this area the market works.

My Lords, I shall not comment on economists. The energy markets have been working reasonably well, although we remain concerned about the lack of a functioning market in the EU which led to some of the interconnector problems that we had two years ago. That is why we continue to press the EU for a liberalisation of the markets so that they can work effectively.

My Lords, I am glad the Minister raised that last point because, although it is nice to think that markets work, is not the problem that while we are trying to operate a liberal, free market system for gas and other energy products in this country, in the continental part of Europe gas is not operated and distributed on that basis but on a monopoly basis by monopoly methods? Is not the danger that when we get to the coldest hours, the coldest days and the coldest winters ahead—some will certainly come despite global warning—once again we will find that the gas does not get through to us because the monopoly distributors in France and Germany will take it? What are we going to do about that?

My Lords, we fully agree with the view expressed by the noble Lord about the EU market. That is why we have continued to press on liberalisation and supported the Commission, whose inquiry came to the very same finding on the third package on energy. We hope that will come to resolution at the June council. Nevertheless, it is fair to say that, despite that, we have significantly improved the security of supply through the import storage infrastructure that I have mentioned already. So we should not be as dependent, for example, on the interconnector with which we had a problem two years ago. We have another interconnector, we have a pipeline, we have LNG terminals and we have storage capacity.