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House of Lords, 29 May 2012 – Energy – Gas Debate

Lord Ezra: To ask Her Majesty’s Government, in the light of their draft energy Bill, what steps they are taking to safeguard gas supplies in the short and medium term.

The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Lord Marland): My Lords, eight minutes seems like a long time. The UK enjoys a domestic gas supply and extensive import infrastructure and storage. The Government have given Ofgem new powers to strengthen the commercial incentives for the gas market participants to meet their contractual supply obligations. We have also asked Ofgem to report on the need for further measures to improve gas security.

Lord Ezra: My Lords, it seems clear from the draft energy Bill that over the next few years, before new nuclear and fossil fuel plants with carbon capture and storage come into operation, we shall be increasingly dependent on gas supplies, as the Minister stated, particularly imports as our own resources from the North Sea diminish. Does the Minister agree that in those circumstances and in view of the fact that a number of major countries have indicated their intention to reduce their nuclear power generation, which will increase pressure on gas supplies, it is particularly urgent that we take additional measures to safeguard our supplies, given that rather seriously developing situation?

Lord Marland: I totally agree, although I am not sure I agree that there is a seriously developing situation. We now have 240 years of gas supply throughout the world, which is extremely encouraging. What is more, that gas supply is very liberally scattered across countries such as Mozambique, which has just discovered gas, and Algeria, which has discovered more shale gas, as has America. I do not hold with the last point made by the expert noble Lord. However, clearly this is no time for complacency and this may be an opportunity for me to say that we have 150% of LNG capacity in this country above demand. We are increasing the amount of storage by 20%. We still have just under 50% of our own supply. We have had unprecedented demand for our new round of licences. So the situation is not as gloomy as the noble Lord indicated.

Lord Lawson of Blaby: My Lords, does my noble friend the Minister agree that the best way of safeguarding our gas supplies is the most rapid development of our indigenous shale gas resources? Will he give an undertaking that the Government will present no impediment to the rapid exploration and development of our own shale gas?

Lord Marland: I cannot guarantee that there will be no impediments; nor would my noble friend expect me to. The reality is that we are taking this very thoroughly and steadily. The Government fully support this development. At the moment, according to the British Geological Survey, shale gas equates to only 5% to 10% of our potential gas supply, but it is still a significant figure.

Lord Lawson of Blaby: No one knows.

Lord Marland: As my noble friend says, no one knows. The British Geological Survey’s latest report, which we await with bated breath, will be very indicative.

Lord Foulkes of Cumnock: Given that the gas is coming from countries that are not the most stable in the world, that the nuclear power programme is falling behind, as we heard in reply to the earlier Question, that the BP oil deal with Russia is in great difficulties, as we have heard today, and that our largest oil refinery is facing closure, is the Minister not being just a little complacent?

Lord Marland: I might be many things, but I do not think that the noble Lord will find me being complacent. I do not agree with him that gas is coming from unsafe places. Twenty per cent of our gas comes from Norway, with which I think we would all agree we have a safe and clear relationship; 5% to 10% comes from the Netherlands, with which we have another strong relationship; and, of course, 50% is from our own supply. We are not being complacent. We have given planning permission for another 20% of storage. We have made sure that our LNG stations are the best in the world. Ofgem is continually on the case in its work, and our gas generation strategy, which we hope to announce in the autumn, will be a fundamental game changer in that regard.

Lord Jenkin of Roding: Does my noble friend agree that there would be a greater chance of increasing the amount of gas storage in this country-we have far less than all the other countries in the European continent-if there were a statutory obligation on gas suppliers, similar to the one that affects suppliers of petroleum, to maintain a reserve in this country? This would enable those who are planning storage plant to raise the capital to pay for it.

Lord Marland: Storage is important, but one has to remember that we have 16 days of storage and planning permission for a 20% increase on that. Storage is therefore increasing, but the fundamental fact is that 150% of the nation’s supply of LNG is capable of being delivered and processed very quickly. So I do not think that storage is the be all and end all, particularly as we have three dedicated pipelines-one from the Netherlands, one from Norway and one from our own supply-which give us about 80% plus of our supply. I am therefore not as hung up on storage as the noble Lord might expect me to be.

Baroness Worthington: My Lords, I thank the Minister for his comments. I am sorry if I caused him to lose his way; perhaps I shall try an easier question. Although gas as well as electricity is used for heating, the excuse given in the electricity market reform Bill for the Government focusing just on electricity is that there will be a greater uptake of electrical heating. What are they doing to promote the uptake of electrical heating and will they regulate to prevent the installation of gas into new buildings?

Lord Marland: That is a much easier question, I must admit, although it is not one to which I have a ready answer-I might refer to the Leader again. Gosh, is that the time? I really have now lost my way, again. We are encouraging all forms of heat into homes. It will be price driven and consumer demand driven, and it is fundamentally important that the consumer has the best possible pricing and the cheapest possible electricity and heating, so the Government are doing everything they can to ensure that.

Hansard, 30 May 2012