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| Running out of gas |
As we all know, Ireland is currently paying the price for the inability of its political and corporate leaders to take seriously the warning signs of an economy where property investment and borrowing generally got out of control. Looking at policy and commercial investment plans for energy supply and distribution, Richard Douthwaite asks, are the decision makers showing an alarmingly similar attitude to evident gas supply threats?
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As we all know, Ireland is currently paying the price for the inability
of its political and corporate leaders to take seriously the warning
signs of an economy where property investment and borrowing generally
got out of control. Looking at policy and commercial investment plans
for energy supply and distribution, Richard Douthwaite asks, are the decision makers showing an alarmingly similar attitude to evident gas supply threats?
There is a significant chance that Ireland's gas supply from Britain will be cut off this winter and, if the disruption lasts more than a few hours, that electricity blackouts will occur and homes will be left without heat. This risk will only be eased in 2010 when Corrib gas starts coming ashore.
Gas supplies 27 per cent of Ireland's total energy demand and is burned to provide almost two-thirds of its electricity. As the gas fields off the coast of Cork are practically exhausted, almost all this gas comes from Britain. Two pipelines are used, both from the same terminal in Scotland at Moffat, which also supplies the gas used in Northern Ireland along another pipe. Consequently, if a problem develops at Moffat, or in the two pipelines that supply it, the whole of Ireland could lose almost all its gas supply for several months – depending, of course, on how bad the problem was.
Such problems do happen. In March this year, there was an explosion at Shell's main gas pumping station at Bacton in Norfolk, which handles a third of the British supply. Fortunately, only half the station was affected but gas prices shot up. Moreover, problems can take a long time to remedy. The oil pipeline terminal which blew up at Buncefield in Hertfordshire in 2005 has still not re-opened.
Another worry is that Britain is becoming increasingly dependent on importing gas itself as its North Sea reserves are depleted. In 2003 imported gas was used to meet just 2 per cent of British demand, but imports are expected to contribute almost 40 per cent this year and 80 per cent by 2018. This makes it a much less reliable supplier.
While Britain has a gas pipeline connecting it with Belgium and another to Holland, and two to bring in gas from the Norwegian North Sea, plus two Liquid Natural Gas (LNG) terminals where gas can arrive by tanker, it has an inadequate diversity of supply options to ensure it can get all the gas that it – and Ireland – needs. This is because both the Belgian and the Dutch pipeline bring in gas from the same main source – Russia – which has already demonstrated its willingness to use gas as a political weapon by turning it off.
Russia has about a third of the world's known gas reserves and is trying to set up a global gas cartel modelled on OPEC. In July it effectively took over Turkmenistan reserves by signing an agreement to buy all that country's gas for the next 20 years at a price based on whatever is the average of the wholesale gas price in Europe and in the Ukraine. This will double the price that Turkmenistan receives next year.
The Russian move may have destroyed the economic viability of the proposed Nabucco gas pipeline which was intended to provide an alternative to Russian supplies. It was planned to run from Turkey to Austria via Bulgaria, Romania and Hungary carrying Turkmen and other gas. “For the UK which has built an infrastructure based on cheap gas, this is a bleak picture indeed” the Oil Depletion Analysis Centre newsletter commented.
Britain realises that its growing reliance on imported gas is exposing
it to risk, particularly as it only has 13 days' supply of gas in
storage whereas Germany has 99 days and France has 122. Ireland has
two. A British parliamentary committee wrote in a report published in
July: “The Government has not responded quickly enough to the UK’s
increasing, and entirely predictable, gas import dependency by
encouraging investment in storage.”
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