Rationale – The need for gas storage

Over the past 40 years, the UK has become reliant on gas for a major portion of its energy supply. This situation has evolved as the UK had plentiful, low cost supplies of gas that were easy to access from the North Sea and the Irish Sea.

These reserves are now declining and the UK is increasingly dependent on gas imports, mainly from sources such as Norway, Russia and the Middle East. It is predicted that by 2018, over 70% of the UK’s gas needs will be met by gas imports.

The increasing reliance of imports has implications for security of supply and price stability. In the UK, there is a significant difference in gas consumption between the summer and winter months (‘swing’). Historically, this swing has been met by the variation of output from gas producing fields in the North Sea. It is anticipated that onshore and offshore gas storage facilities will play an increasingly important role in ensuring security of supply and stability of energy prices for the UK, as the ability of domestic gas producers to vary output at short notice in response to demand, diminishes.

At present, storage capacity in the UK stands at around 5% of annual demand, compared to an average of around 20% in other northern European countries. The Department for Business Enterprise and Regulatory Reform (BERR - formerly the DTI) has acknowledged the need for additional gas storage in the UK, citing in its 2006 Energy White Paper the need for additional gas storage facilities to be developed. Given the limited potential for underground gas storage in the UK, there is a clear need for the Gateway gas storage facility which, once commissioned, will help to substantially improve the security of energy supplies for the GB and Irish markets.