UK to Depend on Gas Imports by 2030

LONDON (Dow Jones Newswires), May 14, 2010

The energy market has underestimated the pace at which the U.K will become dependent on gas imports, according to a report from Bernstein Research.

"Overall, the U.K. faces a burgeoning gas-supply deficit that needs to be plugged by piped imports or LNG [liquefied natural gas]," said Bernstein Research analyst Neil McMahon, highlighting the expectation that the U.K.'s dependence on imported gas will grow from just 1% in 2000 to almost 70% in 2018.

The outlook for U.K. gas production outlook is "fairly dismal," McMahon said, with rapid decline setting in towards the end of this decade.

"Forecasts suggest the U.K. will almost entirely deplete its commercial gas reserves by 2030, making it totally dependent on imports from this point onward," he added.

In contrast to a bearish picture for domestic supply, demand is expected to grow steadily.

Last year, the U.K. brought online two new LNG regassification terminals in Milford Haven, Wales, with combined capacity of over 12 million metric tons a year. As a result, U.K. imports of LNG have increased from around 10 million cubic meters a day in 2006 to over 65 million cubic meters a day in 2010 as domestic production has declined.

Shipping LNG is more costly than piping gas to the end consumer, McMahon added. "The end product is the same, which means in markets where piped gas dominates supply, [LNG] producers must absorb the extra cost and price according to the bulk of supply."

Copyright (c) 2010 Dow Jones & Company, Inc.

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