20 Mar 2006
It’s Peak Gas we need to worry about, not Peak Oil…
It seems despite all the talk of peak oil, that the UK’s downfall might actually end up coming about from peak gas. This last week has been quite extraordinary, with the beginnings of a real crisis for the UK energy sector, not that, unless you were reading the Guardian over the last week, you would actually have heard much about it. Even there, most of the coverage has missed the point and glossed over the larger picture. The place I have learnt the most about what is happening over the week has been from the just-launched UK version of The Oil Drum, which promises to do for the UK what The Oil Drum has done for the US and the rest of the world. Chris Vernon’s insights on the gas crisis have been very illuminating and I recommend it highly. So why is peak gas a more pressing issue than peak oil?
Maybe we should first rewind and look at how the current gas crisis came about. Last week the National Grid issued its first ever Gas Balancing Alert, which in effect asks business to start conserving and to brace itself for shortages. The problem is that, as has been discussed before at **TransitionCulture**, there is very little slack in the fuel supply system, so what would previously have been small and inconsequential problems now have the ability to cause large upheavals.
On Feb 16th there was a fire that has put the Bravo Gas rig, which stored 80% of UK gas stores out of action. Also, the weather has been very cold, one of Norway’s main gas fields has been experiencing drops in output, and there have been strikes in France… oh and the UK only has 8 days emergency storage of gas, compared to 75 days in Germany and Italy and 66 in France. So the immediate problem was an unpredicted drop in supply from the North Sea due to a fire, and also to the fact that North Sea gas production is falling far faster than anyone predicted.
The longer term problem, however, is that due to the fact that North Sea gas has peaked and production is in sharp decline, the UK is having to rely more and more on imported gas. That gas has to come through the pipeline from Europe. Gas prices in the UK have quadrupled in recent months, and the high prices mean that the UK is prepared to pay over the odds for gas from mainland Europe, but still UK gas companies are struggling to find supplies. Most of the gas available in Europe is already committed under contract, so suppliers have no incentive to seek out new supplies for the UK. Add to this the vulnerability in supply and the fact that most of the gas now comes from Russia, Iran or Qatar, and you get a sense of the precariousness of the supply system.
Chris Vernon at The Oil Drum UK sums up the problem very well;
>I think about it like this. If we in the UK were short of oil we could import oil from the other side of the world – moving oil is cheap and easy. We could also afford to outbid many poorer countries. So assuming (perhaps unreasonably!) the whole global economy stays reasonably intact the UK will be okay for oil, demand destruction will come from elsewhere. Also, virtually all oil is used in transport in the UK, most in personal cars. It wouldn’t be hard to cut our oil use in half and still maintain a resemblance of business as usual.
>Gas on the other hand, we can’t import it from the other side of the world since it is very expensive and hard to move, we operate in a much smaller regional gas market of Europe and Russia. Unlike with the global oil market we can’t afford to outbid all the other countries in Europe. Gas is mainly used for heating and cooking domestically and generating electricity industrially. It would be very hard to cut out gas use by half, much harder than cutting our oil use.
>So – it’s easier for the UK so source more than it’s fair share of oil than it is for gas and we’re more reliant on gas than oil. That’s why I think gas is the UK’s problem not oil.
There, in a nutshell is our dilemma. There are other things we can learn from the crisis too. The whole thing offers a few pointers as to how those that run the show will respond when the larger looming energy crisis arrives. Indeed, this may well be the beginnings of that crisis. Rather like after 9/11 where everyone started saying “well, who could have predicted that such a thing would ever happen” despite their desks being littered with such warnings, a cold winter has triggered a gas crisis, and even the usually reliable Guardian writes “the British gas supply market has been caught out by unexpectedly cold weather”. Funny that, I’ve been reading reports in the media, the Guardian included, predicting that this was to be a particularly cold winter since the early Autumn. Rather than, at that point, deciding to do something to actually address the problem (not that his list of options was exactly lengthy), UK Energy Minister Malcolm Wicks decided, no doubt after in depth deliberation, to stick his head in the sand, telling the nation in November that “the UK is awash with gas”.
I also found myself for the first time in my life (it must be my age), agreeing with Sir Digby Jones, the CBI’s director general (isn’t that a great picture?) who said that the fiasco underlined the fact that warnings The Confederation of British Industry gave about shortages last November were well founded and should not have been dismissed by ministers as “scaremongering”. He said;
>”UK energy supplies are seriously overstretched. We have got away with it so far but surely the energy policy of a major economy should not rely on ‘getting away with it’.”
Indeed. Of course, like most things (again, it’s my age…) , it’s all Thatcher’s fault. The ‘Dash for Gas’ which fortuitously means the UK not having to try to hard to meet its Kyoto Protocol commitments, was not introduced for environmental reasons, but to break the National Union of Mineworkers but reducing UK dependence on coal. As a result the UK has become over dependent on gas, without thinking ahead to the time beyond its cheap availability. As with oil, we have wasted this precious once-off gift, and now, we are looking a future of rapidly depleting fuel reserves square in the face. Even Ken Livingstone’s visionary and bold plan to decentralise London’s energy system uses gas to power the combined heat and power systems, although it does of course use that gas far more efficiently than at present.
So here we are, with a 50% probability of a gas emergency over the next few days. As it is, some industry has had to start reducing production. Terra Nitrogen has suspended some UK manufacturing (nitrogen fertilisers for agriculture use a lot of natural gas to make) and other large manufacturers are following suit. The wholesale price of gas quadrupled when the Gas Balancing Alert was issued, meaning bills to domestic customers will almost certainly rise yet again.
Keep an eye on this over the next couple of weeks. It promises to be very interesting. The most reliable sources of information are The Oil Drum UK and the Gas Issues blog. It turns out however, that the real thing we have to worry about is not peak oil, peak gas, or peak uranium, but peak chocolate. The Times reports;
>With chocolate consumption increasing at a rate of 25 per cent a year in the Asia-Pacific region, and 30 per cent in China, chocolate makers fear that coco- bean growers will not be able to keep up with demand. The unstoppable growth of China has aroused fears of future conflicts over natural resources such as oil, gas and water. Now a new and unforeseen catastrophe presents itself: global chocolate wars.
Aha … **now** I’ve got you worried….