Thursday, December 18, 2008

Britain is already where we're about to be.

in The Oil Drum: Europe:
Will the UK Face a Natural Gas Crisis this Winter? (Part 2 of 2)
Posted by Rune Likvern on December 18, 2008 - 9:20am

This is the second part of a two part series about U.K. natural gas. In the first part of this series, I presented a historical look at natural gas supplies in Europe, with a focus on the United Kingdom’s (U.K.) sources of natural gas supplies.

In this second part, I present the results of simulations of the U.K. natural gas supply and demand situation for the remainder of this heating season. The results of these simulations are quite alarming: it appears that there is a significant chance that the U. K. will run short of natural gas in storage before the end of winter.

...If the U. K should run short of natural gas in storage, the U. K. will need to get along with only its on-going sources of natural gas. These are gas pumped from the U. K. continental shelf, pipeline imports, and imported liquefied natural gas (LNG). Recently, these sources have totaled about 300 million cubic meters a day (Mcm/d). Cutting back to this level of consumption may be difficult, since the shortfall is likely to exceed interruptible supplies, especially during cold weather when demand may exceed 450 Mcm/d according to National Grid. There is still considerable uncertainty in precise amounts because demand may vary due to economic conditions and the weather, and supply may vary because of changes in production amounts or imports.

The primary reason for the likely shortfall in natural gas is the continued decline in production from the UK continental shelf. Production has declined in each of the last four years, and is expected to continue to decline in the future. Because of declining U. K. production, increased imports are needed each year. There is no clear path for obtaining increased imports, however. Pipeline imports are expected to remain flat or decline slightly, primarily because Norway's exports this winter seems to be at the maximum level...

As you can see, their usage now outstrips their ability to produce natural gas themselves and there is little excess on the market available for increases in imports. Most natural gas futures have already been bought up and are spoken for - where will they get more? The unfortunate answer is the same for us as for them - there is no "more" to get. The existing fields are all past peak, and production declines are not going to suddenly reverse in the future.

Unlike gasoline, which we can get around by using mass transit, carpooling, walking, biking, moving close to our jobs, etc., it is very expensive and sometimes extremely difficult to change the way your home or water is heated. Especially with consumer loans pretty much an extinct species for the average credit score, people have no way of buying all new heat and hot water systems. And, of course, increasing scarcity will drive up the prices beyond most people's ability to pay long before they actually run short - that's called "demand destruction," you know. I feel sorry for the British people. And I feel sorry for us, too, because we're right behind them.

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