A New Dash for Gas?

Future Energy Strategies 29th May 2012 at Allen & Overy

David Odling, Energy Policy Manager

Oil & Gas UK

UK Gas Production and Consumptionfor 50 years, 1970 - 2020

Sources: DECC, National Grid and Oil & Gas UK0

20

40

60

80

100

120

1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018

Bill

ion

cu

bic

met

res

Possible Production

Probable Production

Sanctioned Production

Historical Production

Demand

Forecast

Sources:DECC, Oil & Gas UK, National Grid 2

Power Station Closures Coming

• 12 GW of oil and coal by end 2015 (LCPD)

• 9.5 GW of nuclear by 2023/5 (old age)• ≤18.5 GW of coal by 2023/5 (IED +old age –

all except Drax B will be 50 years old or more by 2024)

• ≤18 GW of pre-2002 gas by 2023 (IED)= a possible total of ≤58 GW by mid-2020s!!

(peak winter demand currently ~60 GW)

And we are to electrify more of the economy

3

Power Stations: New Builds

• ~10 GW of new CCGTs in 4 yrs, 2009-12• Another 8 GW consented for completion

during 2013-16 (ref National Grid’s 7 year statement)

• New nuclear PSs by 2025: our best guess = only Hinkley Point C, i.e. 3.2 GW

• New coal needs CCS, so not before 2025

• Current wind capacity = ~4.5 GW

• Even if (a very big “if”) 25-30 GW of wind by 2025, a large gap in baseload and back-up

4

Power Stations: “mind the gap!”

• Only one technology can fill the large gap within the timescale = gas fired power

• Mostly CCGTs, maybe some OCGTs (back-up)

• Low risk, high optionality

• And, if CCS works for coal, will work for gas

• But main use of gas is for heat, not power

• What happens to total gas demand is crucial

• So, a new dash for gas fired power??

= very likely, but no new dash for gas!! 5

Produced 2400 bcm

ExplorationPotential

est.500 bcm

Reserves (3P+)

1000 bcm350 bcm

650 bcm

3P+ = Proven, Probable, Possible and Potential

UK Gas ResourcesSources: Oil & Gas UK, DECC

1500 bcm still to go!

~40%

~60%

After 40+ Years of Gas Production, what’s the Future for the UK Continental Shelf?

6