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Oil & Gas UK: More Investment in UK Gas Production Required Alongside Storage to Secure Supply

Oil & Gas UK's energy policy manager, David Odling, today warned against downplaying the remaining potential of the UKs indigenous gas in securing our energy supplies. While production is past its peak, there could be 1.5 trillion cubic metres of gas to be recovered, which would satisfy a significant proportion of demand in 2020 and beyond.

Mr Odling said: "The ability of the UK gas market to respond to the recent cold snap and meet demand illustrates the importance of diversity in our gas supplies, which are the most diverse in EU. While additional storage capacity would play an important role in alleviating any tightness in the gas market during periods of high demand, it must not be forgotten that gas from under the seabed surrounding our own coastline should be our first line of defence.

"Oil & Gas UK believes that up to 1.5 trillion cubic metres of gas remain to be developed and produced from the UK continental shelf (UKCS). Assuming domestic production and imports each satisfy half of our demand, this could last for some 30 years. However, gas projects must prove competitive enough to attract the required investment if these volumes are to be recovered.

"While the new field allowance announced in the last Budget encourages investment in some difficult fields, it needs to be extended to apply more broadly. In particular, a fifth of our gas resources lie to the west of Shetlands, but their remote location makes them expensive to develop; an extension of the allowance would help them attract the £2 billion investment required to bring this gas ashore.

"In addition, a broadening of the rules around the new field allowance would promote investment in technically difficult 'tight' (i.e. geologically complex) gas and the reserves remaining in existing fields in the southern North Sea."

Mr Odling concluded: "In terms of securing our energy supplies and maximising tax revenues and energy-related employment in the UK, it would be a big mistake to leave our own gas resources beneath the seabed. The Government should now work with the industry to rebalance the tax regime to ensure we make full use of our own resources; frankly, our experience over the last few days clearly demonstrates that the country cannot afford to do otherwise."

Published 08/01/10

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