The country could have difficulty meeting gas demand this winter if it is exceptionally cold and industrial consumers could see their supplies cut, the energy minister said on Tuesday.
This is due to falling gas flows from ageing North Sea fields, Malcolm Wicks said.
“This winter could be tough. If there is very, very cold weather in the UK, there could be some difficulty…this would not affect domestic customers but could affect industry,” Wicks told Reuters on the sidelines of the “Offshore Europe” conference in Scotland.
Gas flows from the mature North Sea fields have been dropping for the last five years and this winter supply is expected to be the tightest in years before a wave of new import projects start up in 2006 and 2007.
Many industrial consumers have “interruptible” supply contracts under which they get cheaper gas but their supplies can be cut if there are problems meeting residential demand.
Winter gas prices hit record highs in July on worries about a potential shortage of gas in coming months.
Wicks said the government had held talks with industrial consumers about the surge in wholesale prices but added there was nothing directly it could do to bring bills down.
The government is hoping a surge of interest in the latest North Sea licensing round can help maximise production from the North Sea where the first exploration took place 40 years ago.
On Tuesday, it announced it would offer a record 152 oil and gas production licences to 99 companies of which 24 were new to the North Sea.
“Smaller companies are seeing an opportunity. Some of the bigger boys have judged they want to invest elsewhere. Some smaller companies are leaner and meaner,” Wicks said.
In an attempt to slow the decline in output, the government has changed its licensing structure to give smaller firms easier access to the North Sea.
Oil majors prefer to dedicate capital to larger low cost fields such as those in the Middle East and Russia than to developing the small and more expensive North Sea fields.
By Margaret Orgill
Photo credit: @notnixon via VisualHunt.com / CC BY-NC-SA
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