Select Committee on Welsh Affairs Third Report


6  Liquefied Natural Gas

125. Currently in Britain there are a number of existing Liquefied Natural Gas (LNG) sites which have been in operation in excess of 30 years. In these plants natural gas is taken from the National Grid network, liquefied into LNG, and stored in large tanks to ensure that there is enough gas available to meet the peak demand of UK householders and businesses during the winter.[256] The industry as it is known today started in 1960 when Britain signed a 15-year contract to take less than 1 million tonnes per annum (mtpa) from Algeria. This import to the UK began in 1965 but stopped in the early 1970s when the North Sea started production of natural gas.[257]

126. LNG is currently stored in Wales at Dynevor, Aberdare in south Wales. Dragon LNG is currently building a Liquefied Natural Gas terminal at Milford Haven, thereby increasing Wales' LNG facilities significantly. There is also another LNG terminal being constructed at Milford Haven by South Hook LNG.[258] The new Dragon LNG facilities were due to be completed by the end of 2007.[259] John Burley, General Manager of LNG, told us that this new facility would provide 5% or 6% of the UK national supplies of gas.[260] He explained to us that there were three steps in the LNG process:

First, was liquefaction, cooling of the natural gas to change it into a liquid;

Second, the transportation by ship of the liquefied natural gas; and

Third, the storage, and re-gasification, or the warming of the LNG, to convert it back to gas, and to deliver it into the national pipeline network.[261]

He added that LNG was a very pure form of natural gas and was not carcinogenic. LNG was odourless, colourless, non-corrosive and non-toxic.[262]

127. While the Renewable Energy Foundation told us that they had been an "early voice arguing against too heavy dependence on gas," they recognised that Liquefied Natural Gas, if correctly scaled, was a valuable part of the energy portfolio. Indeed, they impressed on us that "there may well be wealth-generation opportunities for Wales in handling its importation".[263]

128. John Burley pointed out the multiple benefits of LNG. He claimed that "it helps to enhance the security of supply for the energy infrastructure into the UK". [264] He added that "Trinidad, Malaysia, Egypt, Nigeria, to name but a few, Australia, Indonesia, Qatar", all export LNG at present, and that there is therefore, "a wide variety of sources".[265] He added that LNG therefore "allows us to bring natural gas from a wider variety of locations. It provides a reliable source of energy to replace the declining production in the North Sea".[266]

129. Richard Abel, Director, Domestic Energy at the DTI agreed that these new import facilities were "very important, looking forward, for the overall security of gas supplies for the whole of the national transmission system in Great Britain, because, when they are up and running, on present plans they will have the import capacity to supply about 20% of UK demand averaged out over a year".[267] He added that "along with storage facilities to deal with the fact that we use a lot more gas in winter than we do in the summer, the ability to import the gas is very important. The Milford Haven projects are an extremely valuable contribution to that".[268]

130. In its written evidence, Dragon LNG highlighted the further benefit of the positive impact of the plant for the Pembrokeshire Economy. It claimed that the number of people working during the construction phase of the Dragon LNG site was expected to peak at between 400 and 500 people. At the time of its written submission, there were 155 people on site, 62% of whom were local. In addition, Dragon LNG had linked up with the Prince's Trust to establish a "Get into Construction" programme for young people in the area. Once operational Dragon LNG expected to employ 35 people with up to 15 people employed providing services to the site.[269]

131. John Burley added a final benefit to the whole of south Wales from the construction of the LNG plant, was the pipeline to export the gas to the National Grid. As previously identified in this report, south Wales has been on the extremity of the Grid system and, therefore, to help relieve that extremity it is necessary to provide additional pipelines. He argued that the construction of the pipeline would "help relieve the natural gas infrastructure in the UK and provide natural gas to south Wales as well and provide that extra benefit".[270]

132. Friends of the Earth Cymru acknowledged those advantages, and told us that "LNG is an essential part of the fuel mix for the UK for the medium term future".[271] However, they added that they considered it to be only a "bridging fuel" that emitted less carbon dioxide than coal or oil rather than the solution to climate change".[272] They explained to us that they were opposed to the proposals to site two LNG terminals and storage facilities at Milford Haven on safety grounds, particularly upon the location of facilities dealing with hazardous fuel so close to a populated area.[273]

133. In its written evidence to us, Dragon LNG emphasised the safety record of LNG. John Burley claimed that "since 1945, there has never been an incident at a Liquefied Natural Gas import terminal that has affected members of the public or the environment". He added that in over 450,000 ship journeys, no ship carrying LNG has ever lost cargo from its containment.[274] He further assured us that the LNG Terminal would be subject to the Control of Major Accident Hazards (COMAH) Regulations, and a safety report would be required by the Health and Safety Executive (HSE) before the plant can be operated. Furthermore, he assured us that the LNG Terminal has been designated as an economic key point with priority 1 status by the UK National Security Services and the DTI.[275]

134. Friends of the Earth Cymru told us that "at the Waterston power station, 250 MW of the 900 MW of waste heat would be used to re-gasify the LNG".[276] It further provided the practical example of the two oil refineries, located near to the plant both of which have a constant demand for process heat in the form of steam. There was therefore potential for that heat to be used.[277]

135. We welcome the contribution of the new South Hook and Dragon LNG facilities near Milford Haven, and their potential contribution to a diversified and secure gas supply in Wales and the UK. Furthermore, we recognise the positive economic impact of these projects for west Wales, and the fact that they represent another example of Wales providing a lead in the provision of energy for the UK.


256   Ev 208 Back

257   Ev 208 Back

258   Ev 208 Back

259   Ev 208 Back

260   Q 739 Back

261   Ev 208 Back

262   Ev 208 Back

263   Ev 183 Back

264   Q 747 Back

265   Q 747 Back

266   Q 748 Back

267   Q 53 Back

268   Q 53 Back

269   Ev 209 Back

270   Q 745 Back

271   Ev 97 Back

272   Ev 97 Back

273   Ev 98 Back

274   Ev 208 Back

275   Ev 209 Back

276   Ev 98 Back

277   Ev 98 Back


 
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Prepared 20 July 2006