No U.K. Shale Gas Would Lead to 91% Import Reliance: Grid

The U.K. may need to boost natural gas imports to 91 percent from 56 percent without production from shale rock, exposing the nation to global prices for the fuel, according to National Grid Plc.

Imports may reach 71 billion cubic meters (2.5 trillion cubic feet) a year by 2035 without shale gas output and with limited development of offshore fields, National Grid said in its Future Energy Scenarios report published today. The No Progression scenario is based on a slow economic recovery without new environmental targets and gas remaining a preferred choice for power generation over renewables.

“The 90 percent dependency is very, very high,” Richard Smith, head of energy strategy and policy at National Grid, told reporters in London yesterday. “The ultimate implication is that it exposes us more to the global market for gas, which is a price exposure.”

David Cameron’s government wants the development of shale reserves to replace aging North Sea fields and cut energy costs. The British Geological Survey estimates areas in northern England may hold 1,300 trillion cubic feet of natural gas, enough to meet demand for almost 50 years at an extraction rate similar to U.S. fields. Opponents of shale exploration say it’s wrong to allow the use of hydraulic fracturing, or fracking, under people’s property without permission and have pointed to tremors in regions where test drilling was carried out.

U.K. front-month gas, a regional benchmark, averaged 52.15 pence a therm ($8.92 per million British thermal units) this year. To attract liquefied natural gas, Europe needs to compete with buyers in northeast Asia, who paid an average of $15.64 over the period, according to assessments of cargoes for delivery in four to eight weeks by World Energy Intelligence.

Shale Production

U.K. shale gas production could be as high as 32 billion cubic meters a year by 2030, according to National Grid’s Low Carbon Life scenario, which assumes a growing economy, innovation in energy and the meeting of carbon targets.

“The reason the range is just so wide is simply because in the U.K. we still don’t have that massive amount of data from test wells to say what we are really going to be able to recover,” Smith said. “We don’t know about recoverability and economics of recoverability.”

While the U.K. has the capacity to import gas with its network of terminals, “the U.K. exposure is price exposure,” Smith said.

The country, the European Union’s second-biggest gas user after Germany, would need to import as little as 40 percent of its usage under the Low Carbon Life scenario.

Gas from the U.K. continental shelf will peak in 2017 at 38 percent to 46 percent of total supply in all four of National Grid’s scenarios. That share will drop to 8 percent to 16 percent by 2035.

Gas Demand

Demand will drop in all scenarios by 2020 from 2013 levels even if the use of the fuel in power generation, which accounts for nearly a quarter of total consumption, increases, according to National Grid. Gas-fired power plants would act as a backup for renewable generation and as coal plants close from 2018-2019, it said. Total demand will increase in the No Progression and Low Carbon Life scenarios by 2035, and decline in the Gone Green and Slow Progression outlooks.

To contact the reporter on this story: Anna Shiryaevskaya in London at ashiryaevska@bloomberg.net

To contact the editors responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net Rob Verdonck, Claudia Carpenter

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