UK Energy Gap
Posted by Chris Vernon on March 4, 2006 - 5:31am in The Oil Drum: Europe
Provisional figures for 2005 show total production to be 216.2 million tonnes of oil equivalent, 9.3 per cent lower than in 2004. Within this production of petroleum fell by 11.2 per cent, production of Natural Gas fell by 8.2 per cent and production of coal fell by 16.0 per cent.The graph illustrates the total primary energy production and consumption of the UKFor the three months October 2005 to December 2005 compared to the same period a year earlier:
(Source: Energy Trends 1.1)
- production of petroleum fell by 12.1 per cent;
- production of natural gas fell by 8.8 per cent;
- production of coal and other solid fuels fell by 11.7 per cent;
- electricity produced from nuclear sources fell by 1.6 per cent;
- electricity produced from wind and natural flow hydro fell by 10.4 per cent.
Click to enlarge. (Source Energy Trends 1.1 & 1.2)
The breakdown of primary by fuel looks like this
Click to enlarge. (Source: DUKES 1.1.1)
The 1999 peak in North Sea oil extraction and its subsequent collapse of 42% to 1.8mbpd from 3.1mbpd is the largest contributor to fall in total energy production. Interestingly the fall so far has merely reduced net exports to zero - only now some 6 years after peak is the UK becoming a net oil importer.
Click to enlarge. (Source: IEA Supply)
Perhaps of more concern though is the electricity primary fuel consumption, approximately 37% of total energy is used for electricity generation.
Click to enlarge. (Source: DUKES 5.4)
It is that electricity supply which is most threatened. Considering each fuel in turn we can see where the problem lies.
UK gas extraction from the North Sea peaked in 2000, the UK remained a net exporter of gas until 2005. This graph from WoodMackenzie’s report “From Surplus to Shortage” and reproduced in “The Future of UK Gas Supplies” (.pdf) from Parliamentary Office of Science and Technology illustrates the disconnect between indigenous gas supply and demand.
Click to enlarge.
I have altered the graph to include historic extraction back to 2000. The UK appetite for gas at approximately 100 billion cubic meters per year (similar to Germany) is the largest in Europe, replacing this indigenous production with imports as is currently planed will place immense strain on the regional market – there is no guarantee this gas will be available at prices we can afford with the security we require. The UK is at the end of the pipeline across Europe.
The current aging fleet of nuclear power stations are due for decommission with many already operating beyond their original design lives.
(Source: DTI, Nuclear power generation development and the UK industry)
The decision whether to commission any new nuclear build is yet to be made, a report is due in the summer. It is believed likely that this report will green light new nuclear build, the give away is that the Energy White Paper in 2003 concluded nuclear was not feasible – why commission another report unless you are looking for a different answer?
Coal burn is also due to reduce. Not only does the UK import approximately 60% of the coal after the deep mines were closed for economic reasons but approximately a third of the coal power stations set to close due to their emission profile. The EU Large Combustion Plant Directive places strict limits on emission which the aging UK plant can’t meet.
The contribution from renewables is set to grow. Whilst it is widely accepted that the 20% by 2020 target (now downgraded to an aspiration) will be missed at least 10% of supply should be met by 2020.
The government’s energy review consultation (launched Jan 06) states:
By 2020 we are likely to be importing around three quarters of our primary energy.And the Deloitte report (Feb 06) states:
By 2020, over 50GW of new or refurbished generation capacity will be required which represents circa two-thirds of current capacity – equivalent to either 55 new CCGT’s, 30 new nuclear power stations, 95,000 on-shore – or 40,000 off-shore wind turbines.The questions we are left with are:
- How much will this energy cost?
- How secure will the supplies be?
- And will the energy even be available on the market?
Replacing North Sea extraction with imports would add £45bn to trade deficit and all that does is maintain transport and the existing gas use. Further expenditure will be needed if nuclear and coal are also to be replaced.
Trade deficit in 2005 was: £47.6bn. (Source)
Oil and gas are likely to be significantly more expensive in real terms in 2020 than they are now.
It seems to me very unlikely that existing energy supply will be available in 2020 - the challenge then is to maintain as much utility as our energy supply falls.
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There is simply no real recognition yet of the seriousness of the problem. The recent energy price increases of 20%+ following about 15% last year are focussing a few minds - but not all: http://www.planningportal.gov.uk/england/professionals/en/1115313894518.html
on the necessity to buffer supply when you are near the end of the pipeline (Eire is still last!)No doubt we are relying on the US solution to the balance of payments effect - borrow and print. Meanwhile you encourage further exploration by increasing the tax on the North Sea oil operations.......?? The point the powers that be are missing, as rehearsed over and over on TOD, is the length of time required to actually construct the alternatives. Nuclear stations do not appear overnight even when planning is in place. We have probably the best availability of wave and wind energy in europe but we are taking only baby steps to harness it.
I welcome the UK TOD site and only hope that it attracts enough attention to make a difference. This is a worldwide problem and setting up a "Chorus" of TODs seems to be the best contribution we ordinary mortals can make.
The reason I think this is relevant for more than just people living in the U.K. is that there are possible lessons to learn for other countries entering peak oil and maybe patterns will emerge that are interesting to observe with international implications.
For example the U.K.'s political and strategic relations with Russia who are going to be providing lots of gas. Then there's the whole question of nuclear. It appears that Tony Blair, having prayed to his God for inspiration, is going to say yes to a massive increase in nuclear power. Or as they like to call it, the new generation of nuclear power stations.
I remember well over twenty-five years ago whilst at university stating that I thought the oil revenues should be used primarally for three things. Investment in a new transport infrastructure based on a modernised railway system. The modernization of healthcare provision. And finally a radically better education system, so we'd have something to live on when the oil ran out. The development of new industries to replace the old. Instead the money was wasted on tax cuts for the well-off, a massive consumer boom based on cheap energy, and among other things the distruction of the domestic coal industry.
Britain managed it's oil wealth not that differently from some developing nations. That is not really investing in the future, but consuming in the now.
It was strange because the oil was such a gift from posterity, almost a lifeline and the money could have been used so much better. Britain reminded me at the time of an aging courtesan who is suddenly left a small fortune by an admirer. What does she do with the money? Instead of buying a hotel or farm in the country, she opts for a huge party for all her friends and a lot of cosmetic plastic surgury! When the money's gone, she's older and still she end's up on the street corner.
I think the choices the UK faces in relation to energy production are "interesting" to say the least! Gas seems to be an even bigger problem than oil. I know some of my freinds are facing massive increased gas/electricity bills of 22%.
I travelled around the country a lot a couple of years ago and I talked to an awful lot of people from all walks of life. I was doing research for a book. What struck me was how frustrated and angry most people were underneath the surface. I had to keep pinching myself, to remind myself I wasn't in pre-revolutionary France!
I remember going shopping in Reading on a Saturday, and there was almost electricity in the air. People were shopping like crazy, some had two bags of clothes in each hand. The department stores and malls were bursting with excited shoppers. It was fascinating and frightening at the same time. Surrounded by thousands of eager, frantic and gleeful consumers.
I often felt that the elaborate town centre was more akin to a stage in a theatre, and that people were playing roles in a play they didn't really understand. Sometimes I felt that the elaborate stage-sets were far more fragile than were realised and that cracks were beginning to appear in the plaster columns.
What concerns me is that so much of life in Britain appears "unreal" to me. Perhaps this is connected in some way to the lack of real debate in the mainstream media of PO UK and what this may mean for our lives. This site could help to change that. But it will be a real challange.
The Independent and the Guardian have had some good articles about environmental issues and energy supply problems, but here were talking about papers that reach less than 5% of the UK poplulation aren't we?
What is the UK government's anwer to oil depletion? Tony Blair is gung-ho for nuclear. This raises a whole raft of problems in itself.
What is Tony Blair's attitude to the environment? Basically this, that people are not prepared to sacrifice economic growth to save the environment. He sounds like we have a choice in the matter! The real question is, are we prepared to sacrifice the planet for economic growth?
You will have gathered by now that I'm almost at the desparing stage in relation to our political masters, who when all is said and done take important decissions and are supposed to represent us.
Personally I think we're moving into another historic paradigm, a new type of society if you will. I think it will be "post-democratic" and "magic" will make a big comeback. I say "magic" because I also believe the Age of Enlightenment is over. I don't think we're "doomed" though. I'm actually an optimistic person. Though I do think "democracy" and "rationality" as we've known them for the last couple of centuries are under attack.
Anyway Good Luck to you and everyone else, we're going to need it I fear. Thanks for the timely initiative.
One more thing, I think we should drop the term "global warming" it's far to benign phrase to describe what's happening. I think we should use "global meltdown" instead. It's sort of an experiment I'm conducting at TOD USA as well, to see if we can re-define the boundaries of the discourse by re-appropriating language for our own purposes.
Until I stumbled across the Peak Oil problem 3½ short months ago, I had no idea of the importance of energy. I'd never wondered how we'd managed to reduce agrarian employment from 85% of the population to 4%. I hadn't realised that when we measure increases in GDP, we're merely measuring our annual increase in the use of fossil fuels.
Our parents thought that we had it easy compared to them. I think my kids have it easy compared to me. Why is this so? Because we have replaced our work with fossil fuel work. In the West, few of us in paid employment now do any real work. We sell services to each other. "I'll mow your lawn if you coiff my hair." We're all rich and bored so we take "retail therapy" and watch "Desperate Housewifes". I'm almost 50 and I remember a time when it wasn't quite like this. My children simply don't know any different.
It is unreal.
But it may not be for that much longer.
From the US side of the pond Tony Blair looks like the model of environmentalism. The real question for him and for leaders here is, if I help the environment by ending growth and hurting voters in the short run will they vote for me.
The answer sadly is no.
If joe sixpack is forced to drink 5 instead and he thinks it's your fault.... you're fired, no matter how much you've helped the environment.
However, I think people who actually live in the UK do have certain advantages over Americans in relation to their ability to evaluate Tony Blair's qualities.
We are used to very articulate politicians with great rhetorical gifts. The cut and thrust of our parliamentary system promotes these qualities. Without them one is lost. I don't want to sound partisan, but most US politicians would have a really tough time surviving in the House of Commons. Bush's folksy charm just wouldn't work there. Bill Clinton, on the other hand would probably keep his head above water. But he was known as the great communicator after all.
I'm not making jugdement about their politics here, only their chances in a parliamentary environment like Westminster.
Anyway let's cut to the chase. I personally think that Blair is a total sham. I think he's pretty much a confidence trickster with most of the qualities of the charming fraudster. He is very shallow and seems to hate the study of detail. He is also incredibly reckless. He has the habit of saying the first thing that comes into his head when he's in a tight spot and then pulling back at a later date. He is also a primadona who really loves performing on the world stage. I think he's a frustrated rock star. If he was playing guitar in a band he would be the flashiest guitarist around, his fingers racing up and down the neck of his guitar at lightning speed, a flurry of cascading notes mesmerising the audience. He would use all the special effects pedals known to man. But he would have no soul in his palying. He would always play ten notes were one would do. He would not understand that the spaces imbetween notes are just as important as the notes themselves.
History will, I believe judge him very harshly. The British people already have. He is loathed by most people. Who regard him as a proven liar. He will be regarded as an almost tragic figure. A man who seemed to have great qualities at first, who simply pissed it all away for nothing. He will though I think seek fame and fortune in the US, as he's well passed his sell by date in the UK.
I think global meltdown, whilst catchy and in many ways likely to be accurate, sounds too alarmist. And whilst there's reason to be terrified, ti would just turn people off. Global warming sounds almost nice, as well as not telling the whole story. I make it my business to replace the term global warming with climate change wherever possible.
Gas is another story altogether and the first step of the import process (pipeline to Ormen Lange) is the easy (and secure) part. What they don't seem to be telling us, however, is that with N Sea gas declines now running around 9% pa the 20% of UK gas demand to be supplied from Ormen Lange will only hold the situation for around 2-1/2 years, hence the push to develop LNG terminals at Milford Haven and Canvey Island. The prospect of UK electricity generation becoming so dependent on gas imported from the area of the ME around Iran (and Qatar borders Iran) combined with imports by c5000km pipline from Siberia is the stuff of nightmares. As Matt Simmons points out the 4 largest gas fields in that part of Russia are already in decline to which I'd add the comment that 'we will be last only to Ireland along the pipeline route which will run through numerous energy-hungry nations first'.
UK NS gas reserves were enough to supply domestic needs for many decades; instead we have squandered the reserves in barely 3 decades by the 'dash for gas' for electricity generation. This short sighted policy might have helped meet our Kyoto committments but what of the future with world gas prices soaring and big question marks over security of supply? A further discomfort factor is UK's lack of storage capacity (only around 11 days' storage even when Rough is working v c70 days in some EU nations who did not have indigenous supplies to rely on). Despite the pressing need for this situation to be rectified local authorities continue to refuse planning consent for new storage facilities. Do we really have to see electricity (and even gas) rota disconnections before we start to build the necessary storage?
Based on the research I've seen I'm afraid I cannot be optmistic about the UK's energy future - the lead times for alternatives to oil and gas are very long relative to the rapid decline rates we are now seeing. Even if we did as Dr Robert Hirsch recommends and take mitigation steps on a 'Manhatten or Apollo project scale' we'd still likely have a problem even if planning restrictions were waived.
So it would appear, (unless my logic is completely wrong, which it quite probaly is) that we will be able to pay for our oil and gas and won't have to find 50 billion extra. It all depends on what the market price is in fifteen years. Granted it may well sky-rocket, but who really knows. Of course there is the question whether there will actually be an oil surplus for us to buy at any price, but that as they say is another question.
How much tax revenue is collected from BP?
This link would suggest a pretty large tax take:
So... if the annual sticker price of the resource is ~£50bn a year, including say an average of 60% tax take the tax revenue would be around £19bn (60% of £31bn) going into government coffers.
- For around a couple of decades UK has been a net exporter of oil and gas. For the sake of brevity I'm not going to research the stats in detail but let's assume in the good years were were exporting 2m bbbls / boe per day allbeit at a low price i.e. $20/bbl (or boe for gas). That's around £8.3bn pa v projected deficit referred to in above post of £50bn. In other words a £58.3bn pa turnaround.
- A combination of rising world energy prices, ongoing production declines and rising UK demand will ensure the £50bn pa deficit occurs around 2015 rather than 2020. Depletion-Scotland prepared a paper in Sept 2005 in response to a Royal Society Edinburgh energy enquiry which contained forecasts of UK trade balance due to energy imports: Depletion-Scotland submission to RSE
On this basis, assuming the assumptions of supply, demand and price don't change substantially, UK's economic prospects do indeed look bleak especially as other nations, including US, will be in a similar situtation i.e. needing to import energy on a large scale and having to borrow large amounts of foreign currency to finance it. On the supply side I cannot see replacements to declining oil and gas being ready and scaleable in time for UK to offset large trade imbalances much before 2016 even if a start were made today. It will therefore be necessary to adjust both demand and price to make the situation more reasonable i.e. demand destruction on a widespread scale (not just UK) which will have the effect of reducing unit prices as fewer consumers will be prepared to pay heavily for energy imports. In practice this means recession.The early N Sea gas contracts (when there was only a single buyer, namely the Gas Council) were struck at very low prices and with only partial escalation clauses dependent on a number of external energy indices. In practice escalation was rarely triggered and for the first 2 decades or so of NS gas production prices were both low and stable. The contrast between this situation and the scenario where gas has to be imported from various parts of an energy-short world cannot be over emphasised - UK Gov't has really lost the ability to control events at least for the next decade or so.
- Oil and Gas Depletion
- Import costs go higher as we go deeper into peak.
- Need for capital expenditure on New Nukes or
massive Alt.Energy programmes. The cash may simply not be available.- Squandering tax money on non-jobs
- Nine Energy ministers in 8 years
- Reluctance of private companies to get involved in Nuke building due to the possibility of been ratted on by HMG
- Production ramping of oil fields between 1980 -1999 to get a quick buck and a fast payback on platform developments
There are some things best left unprivatised since they are a strategic resource. Power Generation , Rail.Basically we have p1ssed it all away
I have to agree, we have indeed pissed it away.
On the other hand, I'm not sure leaving such important resources in the hands of a government is any better. After all, all of today's Western governments have a closer affinity with corporations than they do with the electorate. By a long shot.
Further to the foregoing discussion, I'm not sure trying to discuss the problem in neo-classical economic terms is actually helpful. And if you want to know why, this is why:
I'm sorry, but if this is the best these guys can offer, I think we need to start looking elsewhere for the "real" costs of a British energy deficit. I think we'll find it in a rapidly decreasing population; a population that becomes increasing illiterate, to the point of ignorance; a population that will become increasingly prone to disease; a population that will go to bed hungry more often than ever imagined. These will be the "real" costs.
Not that crap spouted by the conmen of the markets. Not that crap spouted by the conmen of HM Treasury. The real cost to Britain will be the rising death toll of the elderly and the young. The rising levels of violence as scarcity becomes common place. These will be the real costs.
So, how much will it really cost. in the end? I must profess, I don't know. What I do know is this, if we take no action, no amount of money will matter.
jimbo
;-)
Note that Norway is one of the top four net oil exporters (Saudi Arabia, Russia Norway & Iran). As I have stated many times, IMO the world is right on the brink of a ferocious collapse in worldwide net oil export capacity. Based on Khebab's work, the top four net oil exporters are collectively at the 55% of Qt mark. My projection is that the top four will show a 75% reduction in net oil exports over the next two decades.
The UK is the canary in the coal mine.
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I had the AA bring me from the Isle of Mull back to London last weekend. One of the drivers was a NIMBY. I threw these figures at him, and by the time I got out he'd changed his tune.
Just wanted to check (its been a long time since I studied economics) - would I be right in thinking that doubling the annual trade deficit would drastically weaken the £, and with our strict monetary policy interest rates would rocket, thereby slapping all the NIMBYs with massive mortgage rate rises? Or, of course, they can just have the lights go out.
And the deficit/interest rate rise deter foreign investment, scare the City, and with our lack of a manufacturing base cause an added depression on top of the climate change global depression, turning this country into an economic backwater?
And all cos they think WTs spoil the view. (Plus, a windfarm can be removed, foundations and all, within months. Nuclear takes 100,000 years)
...just out of interest.