The State of Natural Gas in the UK

Natural gas is an essential part of the UK energy mix. Not only does it power most businesses and homes, but it also provides a significant portion of the UK’s electricity generation needs too. The UK’s natural gas market is controlled by a delicate supply and demand balance that is also closely linked to global market dynamics.

UK gas demand is driven by seasonal cycles and weather, with demand being higher in winter months. Short term fluctuations are increasingly common especially in summer, due to the intermittent supply generated from renewables sources like wind and solar. During winter, heating dominates as the most significant component of demand, whereas in summer this demand falls leaving gas fired electricity generation as the biggest user.

Whilst an increased use of energy efficiency technologies has lowered overall energy demand in recent years, natural gas demand is still rising.

Where does the UK’s natural gas come from?

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The UK has its own production from the UK continental shelf (UKCS), which is mostly used domestically, but can also be exported depending on the international supply/demand picture and relative prices.

Production from the UKCS has been ongoing since 1967, and has provided a reliable home-grown supply, making the UK less reliant on global markets. The gas produced by the UKCS comes from both offshore oil and gas fields and onshore gas fields.

While the UK can generate enough gas to meet around half of its needs, a wide range of imports are used to ensure we have enough supply to meet demand.

A significant proportion of our gas comes from Norway via two pipelines: Vesterled and Langeled. But we also receive a smaller amount arrives from continental Europe through three interconnectors; linking us with Belgium (IUK), the Netherlands (BBL), Ireland and Northern Ireland (Moffat).

The remainder is imported global Liquefied Natural Gas (LNG) which is transported by tankers to specific gas terminals situated on the coast. Gas is also held in storage facilities within the UK for future use, including natural storage sites such as salt cavities and depleted onshore gas fields.

When does the UK export gas?

Due to our large North Sea oil and gas development, the UK was a key energy exporter to other countries for a long period of time between the 1980’s and the 2000’s. However, in recent years the UK’s reliance on imported energy has returned to levels last seen in the 1970’s. Although our import dependency is below the EU average.

Despite now being a net importer of energy, the UK does still often export natural gas, particularly to Europe through the Belgian IUK connector. Over 75% of our natural gas comes from the North Sea, either from UK or Norwegian production, and UK export happens when supply and demand factors mean that European prices are significantly high, compared to UK prices, for an extended. Typically, this means that the connector is exporting during the summer and importing during the winter, although there can be shorter term exceptions to this.

How is gas distributed to industry?

Distributing natural gas around the country to areas where it is needed requires a complex infrastructure that includes pipelines to transport the gas, as well as other facilities such as LNG terminals and storage services.

Gas is transported via the National Transmission System (NTS), a network of the major pipelines connecting the natural gas terminals on the coast to power stations and distribution companies. The gas is then distributed to businesses and homes via small local distribution networks.

What can we expect in the future?

Although we now use less energy than in the past and source it from cleaner energy sources, like renewable generation, natural gas consumption is still increasing. This is because it’s a hugely important part of securing a reliable energy source for the UK as well as the fact that it’s more environmentally friendly than other fossil fuels.

As North Sea oil and gas production has declined, the UK is now increasingly reliant on the global natural gas market. This market has become more globalised in recent years, with increasing supplies of LNG and shale gas providing a regular and flexible supply. However, this increased trade also brings with it challenges, as UK markets and prices can easily be affected by supply and demand shocks in other regions.

Joe Hickman