The UK's Energy Supply: Security or Independence? - Energy and Climate Change Contents


Memorandum submitted by British Geological Survey

EXECUTIVE SUMMARY

1.  Britain should consider more onshore and offshore gas storage in depleted gas fields and salt caverns, and more options for compressed air energy storage, but the geology for these may be specialised and will need specialist survey.

2.  Shale gas, of which Britain may have considerable resources, might be an important guarantee of secure gas supply into the future.

3.  Britain should consider developing independent strategic intelligence about oil and gas supplies in the Middle East and Russia, as well as long term monitoring of global uranium production and trade to support the proposed UK nuclear new build.

Question: How sensitive is the UK's energy security to investment (or lack of investment) in energy infrastructure, including transmission, distribution and storage?

1.  Underground Gas Storage. Britain's energy security is closely bound up with how much gas it stores. Surface storage in the form of tanks exists, but underground gas storage (UGS) provides significantly greater volumes and meets differing strategic requirements and delivery rates. At present our country does not have the UGS volumes of comparable countries, despite having suitable geology or both salt cavern and depleted field storage.

2.  Introduction. Until recently, abundant offshore gas reserves have meant that swings in UK demand could readily be taken up by increasing, or decreasing, output from North Sea and East Irish Sea gasfields. However, UK offshore fields in particular are rapidly depleting and the UK became a net importer of gas during 2004. Consequently, offshore gasfields will no longer provide this flexibility and the UK is becoming increasingly dependent on imports from the global gas market. Government predicts that over 80% of UK gas supply will be imported by 2020. Figures from National Grid suggest that current usage led to imports levels of 40% in 2009, indicating that the predicted import levels of 2020 may be reached sooner rather than later. Security of supply will become a matter of growing national importance.

3.  Current UK annual gas consumption is around 103 billion m3, but storage capacity of approximately 4.6 billion m3 is only 4% of annual consumption; much less than many European countries (Figure 1; Table 1). This storage volume is equivalent to about 14 day's supply, which is again much less than many European countries and the USA (Table 2). A report by Cedigaz in 2009 found that 638 underground gas storage (UGS) facilities operate worldwide, providing a total working capacity of 328.9 billion cubic metres (bcm) (10.7% of global gas consumption). Of these, 446 are located in America (395 in the United States). Europe ranks second with 129 underground gas storages, with more than half located in three countries: Germany (47 sites), France (15 sites), and Italy (10 sites). The Cedigaz report found 199 new storage facilities or expansions of existing ones that are either under construction, under development, or planned. Of these, Europe has the most with 123 projects, representing more than 75 bcm of additional working capacity, compared to the current 82 bcm available. Tables 3 & 4 illustrate the relatively small number of proposed developments that exist in the UK compared to planned European projects.

Figure 1

COMPARISON OF EUROPEAN GAS STORAGE CAPACITY AS A PERCENTAGE OF NATIONAL DEMAND


Sources: Gas Infrastructure Europe, CIA World Fact Book 2009, National Grid and International Energy Agency

Table 1

NATIONAL DEMAND, STORAGE CAPACITY AND PLANNED NEW STORAGE CAPACITY OF EUROPEAN COUNTRIES
CountryNational
demand (bcm)
Storage
Capacity
(bcm)
Storage
capacity
as %age
National
Demand
Planned
new
capacity
(bcm)
Austria8.444.2 503.2
Belgium17.40.63 40.08
Bulgaria3.50.35 100
Czech Republic8.623.1 360.9
Denmark4.61 220
France42.712.3 291.8
Germany10120 209.5
Hungary13.43.72 282.3
Italy84.914.34 1711
Netherlands46.45.1 114.5
Poland16.41.58 101.23
Romania17.12.69 162.35
Slovakia6.222.75 440
Spain34.44.14 125.59
UK1044.3 411.7
Ukraine66.332.13 480

Table 2

ANNUAL GAS CONSUMPTION AND GAS STORAGE VOLUMES IN THE UK AND OTHER COUNTRIES
CountryAnnual
consumption
(Billion m3)
Storage
Capacity
(Billion m3)
Storage
capacity
relative annual
consumption
Days
storage
UK103 4.64% 14
Germany101 2121% 69
Italy81 12.916% 59
France46 12.126% 87
USA653 11418 66

Sources: Gas Infrastructure Europe, CIA World Fact Book 2009, National Grid and International Energy Agency

4.  The UK has an ageing stock of nuclear and coal-fired power stations, of which about one third will need replacing by 2015. If these plants are not replaced by new build, then it seems likely that much of the new capacity will be provided by conversion of plants to gas-firing, further increasing demand. In the event of supply disruption the lack of storage and increased consumption leaves the UK more vulnerable. Whilst a number of underground storage facilities are in various stages of planning or construction (Tables 3 & 4), these will not be available for a number of years during which time imports will rise.

5.  Britain's largest gas storage facility is the depleted Rough Gasfield lying offshore in the southern North Sea. The construction of salt caverns in offshore regions has also been proposed, with one site in the East Irish Sea (the "Gateway" project) having been granted the first offshore storage license in 2010. Construction will not begin until late 2011 at the earliest. Other sites might be available in the Zechstein (Permian) salt structures of the Southern North Sea.

6.  Onshore storage facilities would provide capacity closer to market demand, but such facilities are strongly opposed by local residents. If it is decided that more UGS is required onshore in Britain then it must be recognized that it is only possible to develop these facilities in certain geological strata or structures, which occur in only a limited number of locations. Onshore, six UGS facilities are in operation: two depleted fields and four salt cavern sites, one of which comprises only one cavern. A number of gas storage projects have gained planning consent and are currently under development/construction, but the majority of proposed facilities are held up by the current planning regime.

7.  The following sections outline the areas onshore Britain most likely to attract interest. The technology involves the injection of gas from the National Transmission System (NTS) into the pore spaces of the aquifers, depleting hydrocarbon reservoir rocks or salt caverns during periods of low demand and its withdrawal during periods of high demand. For pore storage injection is generally during the late spring, summer and early autumn months with withdrawal during the higher demand winter months. Salt caverns can be filled and emptied more rapidly and so can accept or deliver gas more readily. Pore storage facilities therefore offer more strategic and longer-term seasonal storage, helping to balance long term requirements and complement the medium to shorter term, higher deliverability function offered by salt cavern storage.

Table 3

OPERATIONAL UNDERGROUND LNG AND GAS STORAGE FACILITIES IN MAN MADE CAVERNS
AreaSite Owner/operatorStorage capacity (Mcm) Number of caverns (Chalk & salt storage) Approx. depth of storage (top-bottom if known - m) Comments
Operational facilities - Chalk caverns
North LincolnshireKillingholme ConocoPhillips and Calor Gas0.1 (liquid =60,000 tonnes of LPG) 2180-?210Two mined caverns in Chalk c. 180 m below ground level, operational since 1985.
Operational facilities - salt caverns
Cheshire BasinHolford H-165 IneosChlor (formerly operated by NG (Transco), now Ineos 0.1751350-420 Planning approval granted 1983. Ten-year inspection completed 2006. One of number of abandoned brine cavities with ethylene & natural gas storage since 1984.
Cheshire BasinHole House Farm (Warmingham Brinefield) Energy Merchant (EDF Trading)75 4300-400Planning permission granted 1995. Four caverns, operation commenced in February 2001.
East YorkshireHornsea/ Atwick Scottish & Southern Energy325 91,730-1,830Planning permission granted 1973, operating since 1979
TeessideSaltholmeSabic (formerly IneosChlor/Huntsman) Up to 0.12-0.218 (plus 9 redundant) 350-390Development in 1950s, storage started 1965-1982. 18 ex ICI caverns in operation. One "dry cavity storing nitrogen"; 17 "wet" storage cavities containing hydrocarbons ranging from Hydrogen to Crude Oil; nine redundant storage cavities; 75 redundant brine wells/cavities never used for storage; five in service brine wells.
TeessideSaltholmeIneosChlor/Northern Gas Networks 0.084340-370 Four ex ICI Natural Gas cavities. Development started 1959-1983, storage started 1959-1983. Now owned by IneosChlor & operated by NGN for Natural Gas.
TeessideWiltonSabic (formerly IneosChlor/Huntsman) Up to 0.045650-680 Storage started from 1959 to 1983. Eight caverns leached, five operational cavities in total leached for storage purposes: four cavities storing Ethylene, one cavity storing Mixed C4's. Three cavities redundant or never in service for storage.
Teesside  Wilton SembCorp/BOCNot available 2650-680Two ex ICI cavities - operational & storing nitrogen (for BOC Nitrogen).

Table 4

UNDERGROUND GAS STORAGE FACILITIES PLANNED OR UNDER CONSTRUCTION IN SALT CAVERNS OR OF TYPE AS YET UNKNOWN
AreaSite Owner/operatorStorage capacity (Mcm) Number of caverns (Chalk & salt storage) Approx. depth of storage (top-bottom if known - m) Comments
Planned facilities - salt caverns
Cheshire BasinByley/Holford (southern end of Holford Brinefield - Drakelow Lane area) Scheme initiated by Scottish Power, sold to E.ON UK plc 2005 160-170 (working volume)8 630-730May 2004 Deputy Prime Minister and Secretary of State reversed Public Inquiry decision. Decision upheld by High Court Dec 2004. Under construction. Salt caverns to be leased from Ineos who own the salt & will construct the caverns that will be approximately 100 m high by 100 m in diameter.
Cheshire BasinHill Top Farm (Warmingham Brinefield) Energy Merchant (EDF Trading) - formerly British Salt 10 existing brine caverns: c. 2994 new caverns: c. 115(11 new caverns: c. 317) 10 existing brine caverns & between 4 (possibly 11?) newly constructed caverns 240-300Planning permission gained for conversion of 10 existing brine caverns and between four and 11 new caverns by British Salt in May 2008 - this figure could include the Parkfield Farm caverns (7). Storage volume expected to be: 0.69 Mcm (22,400 tonnes/29.9 Mcm) for each existing brine cavern and 0.6 Mcm (21,600 tonnes/28.8 Mcm) for each new cavern. Interests sold to Energy Merchant (EDF Trading) July 2009. EDF Energy now plans to develop the project alongside EDF Trading using a revised planning permission designed to take advantage of synergies with the adjacent Hole House Farm gas storage facility.
Cheshire BasinParkfield Farm (Warmingham Brinefield) Energy Merchant (EDF Trading) - formerly British Salt c. 2017240-300 Planning permission gained for seven new caverns by British Salt in May 2008. Storage volume expected to be 0.6 Mcm (21,600 tonnes/28.8 Mcm) for each new cavern. Interests sold to Energy Merchant (EDF Trading) July 2009. EDFT will not develop new caverns but use the Parkfield site to support operations at the adjacent Hole House (operational) and Hill Top (approved) storage facilities.
Cheshire BasinStublach (Holford Brinefield between Drakelow Lane and Lach Dennis) Ineos Enterprises Ltd540 (storage volume)430 (working volume) 28>500> planning application December 2005, permission received late 2006. Under construction in two phases with initially 8-10 caverns constructed. Expected to be operational for about 40 years.
Cheshire BasinKing Street (Holford Brinefield) King Street Energy (NPL Estates)c. 263 (storage volume)160 (working volume) 10>400Proposed construction of ten caverns. Planning application turned down Dec 2008, decision appealed by applicant and Public Inquiry held July-August 2009, with the Secretary of State granting permission on 9 December 2009.
East YorkshireAldbrough South - Phase I Scottish & Southern Energy and Statoil 42091,800-1,900 Planning permission granted 2000, two sites with three and six caverns initially - Scottish & Southern Energy and Statoil combine ownership and development. Under construction, with storage commencing in 1st two caverns in 2009, with capacity in another three caverns expected to become available by the end of 2010 and full commissioning of the Phase 1 operations expected in 2012.
East YorkshireAldbrough South - Phase II Scottish & Southern Energy and Statoil 42091,800-1,900 Consent sought for extension to phase 1 development. Permission to increase storage capacity granted by East Riding of Yorkshire Council in May 2007. Final size of Aldbrough facility will be 18 caverns
NW EnglandPreesallCanatxx Gas Storage Ltd c. 1700 (storage volume)1200 (working volume) up to 42245-510Significant public objection to proposals. Public Inquiry held (late 05-early 06), with planning permission refused by Secretary of State (DCLG), October 2007. Second planning application submitted Feb 2009 and refused by County Council January 2010.
East YorkshireNorth of Aldbrough (Whitehill) E.ON UK plc42010 c. 1,800Geological feasibility studies carried out 2006 on land to the north of Aldbrough. Planning application submitted to East Riding of Yorkshire Council, January 11th 2007. Still in planning in late 2009, delaying anticipated completion date of 2013.
Wessex-Weald Basin, DorsetIsle of Portland Portland Gas Ltd. 1000 142,100-2,300Planning permission granted by Dorset County Council 16th May 2008. Struggling to raise investments to commence project, which began with site construction at end July 2009. Drilling is expected to commence towards the end of 2010.
East Irish Sea (offshore)"Gateway Project" Gateway Gas Storage Limited/Stag Energy 151220c. 700-875 Planning application submitted October 2007. Barrow Council approve plans for onshore gas compression station June 2008, which was followed by UK Government approval in the same year. Granted first offshore storage permit by UK Government in February 2010. In FEED process 2010-2011.
Islandmagee, Larne, N IrelandLarne Lough Portland Gas Group/Islandmagee Storage Ltd) 500 (working volume)Not available 1,500Planning application submitted Mar 2010
Planned facilities - salt mines
CheshireNorthwichConsortium Not availableNot available > 250 mProposals put forward in November 2009 to convert and use former ICI salt mines in the north Cheshire Basin area.
Offshore BactonSouthern North Sea Stag Energy1500Not available Not availableIncluded in National Grid's 2009 review of underground gas storage developments and proposals. No details available.

8.  Natural gas storage in depleting oil/gasfields. Many UK onshore basins are now at a mature stage of exploration. Nevertheless, they continue to attract interest and large areas remain licensed for production and continued exploration (Figure 2). With improving technology modest onshore discoveries continue to be made. However, depleting oil and gasfields also have the potential to provide significant volumes for underground gas storage. During gas storage operations, some remaining natural gas will also be produced and consequently a production licence will be required.

Figure 2

PROSPECTIVE ONSHORE SEDIMENTARY BASINS AND SIGNIFICANT OIL AND GASFIELDS. LICENCE AREAS ALSO SHOW AREAS OF COAL MINE AND COAL BED METHANE PROSPECTIVITY


Source: BGS

9.  Salt caverns. Former brine caverns created by solution mining of salt have been used to store hydrocarbon products for many years. At Billingham (Saltholme) and Wilton on Teesside storage of gases, which include methane, nitrogen and hydrogen, commenced in the late 1950s. This included the Northern Gas Board's use of a solution-mined cavity on Teesside to store town gas in 1959. There are about 30 caverns currently in use. Completed solution cavities in Cheshire are also used for ethylene and natural gas storage.

10.  However, these former brine caverns are not ideally shaped or spaced for natural gas storage and today specially designed caverns are engineered. Gas storage in salt caverns is covered by British (and European) Standard (BS EN 1918-3:1998). Salt caverns are advantageous because salt is impermeable and under most engineering and relevant geological conditions (increased temperatures and pressures at proposed storage depths), deforms in a ductile manner (creeps or "flows") rather than by brittle fracturing or faulting. Fractures due to faulting in the geological past are, therefore, likely to have been "annealed" and sealed.

11.  In the UK a number of proposed schemes are at varying stages in the planning and construction process, including (Table 4): an extension to Hole House and at Byley, Stublach and King Street near Holford in Cheshire; the Isle of Portland in Dorset and at Islandmagee near Larne in Northern Island Preesall in Lancashire was rejected by the Secretary of State (DCLG) in late 2007, following a Public Inquiry that ran from October 2005 to May 2006 and a further planning application in January 2010 was refused by Lancashire County Council. The developer is now preparing to seek planning permission through the Infrastructure Planning Commission (IPC).

12.  Compressed Air Energy Storage (CAES). Wind power generation is set to increase in the UK. At lower levels of installed wind capacity, studies have shown that the intermittency of wind is unlikely to create a problem. The aggregated output from wind farms distributed around the country is unlikely to ever fall to zero and the short term variations of wind generation are small compared to the corresponding variations in demand. However, as wind generating capacity rises beyond about 20% the requirement for back-up generation or energy storage increases. In addition at times of excessive wind generation the power cannot be accepted onto the grid leading to "constraint costs" that raise the cost of wind generation; energy storage can therefore utilise all of the available wind energy. Wider dispersion of wind farms, possibly including super grid connections between countries, will help to smooth wind generation, but does have security of supply issues. Increased wind generation is likely to need some energy storage, although this may only need to be a percentage of the installed generating capacity.

13.  Compressed air energy storage (CAES) and pumped hydro energy storage have been demonstrated as the only technologies that could have the capacity for large scale energy storage within an electrical power grid. However pumped hydro can only operate onshore and is restricted by the number of available hillsides where a scheme could be constructed. CAES needs to be located above suitable geology for either aquifer storage or cavern storage. There are competing demands for aquifer storage, especially offshore, from CO2 sequestration, conventional gas storage and direct use geothermal. Cavern storage is ideally created within salt deposits, but onshore there are competing demands from conventional gas storage.

14.  Compressed air energy storage is being considered in many countries, including the UK. The basic concept of CAES is more than 30 years old and involves using off peak electrical energy from renewable sources such as wind, or excess output of power plants, to compress air, which is then stored under pressure underground. The compressed air is then released through a gas turbine to generate electricity during periods of peak demand.

15.  Storage can be in porous rocks (aquifers or depleted oil/gasfields) or, more commonly, in large voids such as salt caverns or former mine workings. The first CAES facility using salt caverns was created in the Huntorf salt dome near Hamburg in Germany in 1978. A second plant near Mobile in Alabama, USA was constructed in 1991 and others are being planned around the world. CAES facilities are being developed in large (unlined) limestone caverns in Ohio, USA and in an aquifer to be jointly used for gas storage (Iowa, USA). Similar CAES facilities could be developed in the UK in impermeable rocks of suitable quality (eg salt beds or "hard rocks") in conjunction with, for example, near shore wind farms. CAES feasibility studies were undertaken in the UK during the 1980s by, the Central Electricity Generating Board (CEGB). However, no development has yet taken place.

16.  Similar proposals, but using rock caverns to store water at different levels for closed loop pump storage, have been suggested for Scotland.

17.  If renewable energy is to become an important element of the energy mix, then options for energy storage, including CAES, may have to be considered. This might be facilitated by distributed generation and microgrids, in which small CAES plants distributed around the UK could play an important role in the storage of off peak renewable energy.

Question: What would be the implications for energy security of a second dash-for-gas?

18.  Further delays on decisions on new nuclear power plant build and the requirements for carbon emissions reductions and clean coal technologies are likely to lead to a second dash-for-gas for electricity generation. Given the preceding commentary on the already increasing reliance on imported gas/LNG and a shortfall in UK UGS volumes, this would have an immediate and potentially important impact on national security of supply and energy issues. Immediate UK requirements are thus likely to be for increased storage volumes of various types, including salt caverns and depleted fields. However, an increased awareness of alternative, unconventional gas sources like shale gas and environmentally acceptable methods of exploitation would be advantageous.

19.  Organic-rich shale contains significant amounts of gas held within fractures and micro-pores and adsorbed onto organic matter. Shale gas prospectivity is controlled by the amount and type of organic matter held in the shale, thermal maturity, burial history, micro-porosity and fracture spacing and orientation. In the UK licences have already been taken up by forward-thinking companies and the interest will be high for the next licensing round.

20.  It is too early in exploration of UK shales to be certain about the contribution which shale gas production could make. In the US, shale gas extracted from regionally extensive units such as the Barnett Shale currently accounts for ~6% of gas production. Comparisons with the US suggest that there will be some production in the UK and all organic-rich shales in the UK are likely to be tested for their resource potential.

21.  The lowest risk exploration is where source rocks have accompanying conventional hydrocarbon fields, which in the UK include the Upper Bowland Shale of the Pennine Basin, the Kimmeridge Clay of the Weald Basin and possibly the Lias of the Weald Basin. Deeper Dinantian shales should also be tested in the Pennine Basin and possibly in the Oil-Shale Group of the Midland Valley. Higher risk is attached to the Upper Cambrian source rock on the Midland Microcraton, which although it has not been severely tectonised, has not sourced conventional fields that have been preserved. The highest level of risk is attached to black shales within the Caledonian and Variscan fold belts, which have high organic carbon but are tectonised (affected by thrusts, intruded by igneous intrusions and converted to slates) and also have no overlying fields.

22.  British shale gas might be regarded as "stored gas" if reasonable assessments of the potential can be made.

23.  BGS reports on Worldwide Shale Gas and UK prospectivity are on the DECC Promote website: (https://www.og.decc.gov.uk/upstream/licensing/shalegas.pdf

Figure 3

MAIN POTENTIAL SOURCE ROCKS AT OUTCROP, IN RELATION TO THE CONVENTIONAL GASFIELDS AND GAS DISCOVERIES



Note: Larger subsurface extents of the source rocks are excluded from this simplified map. Lower Palaeozoic, higher risk prospects not all shown and partly underlie Mesozoic formations.

Question: How exposed is the UK's energy security of supply to international events?

24.  Britain has long term interests in obtaining oil and particularly LNG from the Middle East. The events of the "Arab Spring" in the last few months have highlighted the fragility of the system that delivers oil and gas. 80% of the world's oil reserves are located in the Middle East, 62.5% coming from the "Arab 5": Saudi Arabia, UAE, Iraq, Qatar and Kuwait and most of this is controlled by national oil companies (NOCs) like Saudi Aramco, Kuwait Oil Company and ADNOC. NOCs may become even more dominant as oil production dwindles in areas which are open to all comers, such as the North Sea and the Gulf of Mexico. Much new oil is likely to be found in the NOCs' territory, precisely because it is largely out of bounds to multinationals such as Shell and BP, and so has not yet been thoroughly explored. Therefore future oil and gas production may be even more concentrated in the hands of the national firms of Russia and the Gulf, most of which do not publish details about reserves or prospects. Currently consultancies such as IHS and McKinsey collect data on basins and regions in the Middle East and worldwide, but these are primarily aimed at investors, not governments and policy makers (Eg IHS "Basin Monitor": http://www.ihs.com/products/oil-gas-information/basins-data/monitors.aspx). The only long term strategic survey of worldwide petroleum prospects, including the Middle East, is that of the USGS' World Petroleum Assessments (http://energy.cr.usgs.gov/oilgas/wep/products/dds60/wepdata.htm) which are essentially long term and strategic hydrocarbons "intelligence" about the region. It may be worthwhile for Britain to begin collecting information about Middle East reserves and prospects, so that it has an independent view of this vital economic area.

25.  In addition to oil and gas, many renewable/ low carbon energy technologies (including wind turbines and electric vehicles) rely on small, but critical amounts of key metals for their manufacture. Almost all of these metals are sourced from outside the EU and the supply of some is subject to significant geopolitical vulnerabilities (such as rare earth metals from China or cobalt from Democratic Republic of Congo). The current Commons Science and Technology Committee inquiry into "Strategic Metals" and the European Commission "Raw Materials Initiative" are addressing this issue, but it is important to understand that security of supply applies to key metals as well as oil and gas.

26.  The UK is wholly reliant on imported uranium to fuel its nuclear generating plants. Determining the ultimate country of origin of uranium imports to the UK from published statistics is problematic. In 2010, Uranium metal enriched in U-235 was imported into the UK from Germany, France, the Netherlands and Russia. Of these countries, only Russia has mines producing uranium.

27.  Global demand for uranium for electricity generation is currently much higher than mine production. At present the shortfall is met by reprocessing, from stockpiles and by conversion of weapons-grade uranium into fuel. However, global mine output is increasing, with production in 2009 at the highest level since 1981. The top four global producers are Kazakhstan, Canada, Australia and Namibia. Uranium occurs in economic quantities in a range of geological environments across the world. As such, the geological and geopolitical constraints on supply are not as severe as those relating to some other metals and fossil fuels. Increasing demand is prompting the development of new mines in a number of countries and production from these is likely to reduce the current shortfall of supply considerably. However, concerns related to the Japanese nuclear disaster notwithstanding, global demand for the low carbon energy which nuclear power provides is burgeoning. The success of the proposed UK nuclear new build will depend on securing supply of uranium fuel in the face of increased competition from other consumers around the world. Long-term monitoring of global uranium production and trade are a vital part of this process. For more information see the BGS Mineral Profile on uranium at: http://www.bgs.ac.uk/downloads/start.cfm?id=1409

March 2011


 
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Prepared 25 October 2011