<The World according to Gave The Oil Drum: Europe EU oil imports set to grow by 29% by 2012>

UK Energy Trends, Q206

Posted by Chris Vernon on September 29, 2006 - 7:26pm in The Oil Drum: Europe

The DTI has recently published its quarterly Energy Trends report with data up to and including the second quarter of this year (2006). The report is available for download here: Energy Trends September 2006 (pdf)

See our previous discussion from June 06 here: UK Energy Trends, Coal

Then we noted the dramatic swing towards coal and away from gas for electricity generation.

Coal supplied 18 per cent more electricity than in the same period a year earlier, while gas supplied 17 per cent less. Nuclear supplied 1 per cent less. Net imports of electricity were 31 per cent higher than a year earlier.
Three months on what do we have?
The main points for the second quarter of 2006:
  • Total energy production was 11½ per cent lower than in the second quarter of 2005.
  • Oil production fell by 13 per cent compared to the second quarter of 2005 as production from older established fields continued to decline.
  • Gas production was 14 per cent lower compared with the second quarter of 2005. Gas imports increased by 30 per cent while gas exports increased by 8 per cent. The UK was a net exporter of gas in the second quarter of 2006, albeit 82 per cent lower than in 2005. Gas demand was 8 per cent lower than a year earlier.
  • Total primary energy consumption for energy uses fell by 2½ per cent. However, when adjusted to take account of weather differences between the second quarter of 2005 and the second quarter of 2006, primary energy consumption fell by 1½ per cent.
  • Final energy consumption fell by ½ per cent. Industrial consumption fell by 2½ per cent, and other final users consumption fell by 4½ per cent; domestic consumption was virtually unchanged, whilst transport consumption was 2½ higher.
  • Coal production was 2½ per cent higher than a year earlier. Coal imports were 11½ per cent higher. Generators' demand for coal was up 10½ per cent.
  • Coal supplied 10½ per cent more electricity than in the same period a year earlier, while gas supplied 14 per cent less. Nuclear supplied 6 per cent less. Net imports of electricity were 35 per cent higher than a year earlier.
The trends make depressingly familiar reading, presenting a dramatic collapse UK’s primary energy sources with the exception of small growth in local coal production. Increased reliance on coal itself is problematic due to increased carbon dioxide emissions in comparison to any other energy source.

The magnitude of these declines is quite shocking, totally 11.5% reduced total energy supply from Q205 to Q206. This really should be a significant story but I don’t see DTI document being discussed anywhere in the mainstream media, sustained surely double digit declines in production can’t continue for long without significant impact?

Looking at the detail for oil:

Total indigenous UK production of crude oil and NGLs in the second quarter of 2006 was 13.2 per cent lower than a year earlier. During the second quarter of 2006 the UK was a net importer of oil and oil products by 1.6 million tonnes, whereas in the second quarter of 2005 the UK was a net exporter by 1.1 million tonnes.


Click to enlarge.

Despite this decline the country is doing nothing to address the depletion of the indigenous resource. In fact the opposite is happening, not only is North Sea oil depletion barely on the agenda but as we transition into an oil importing country our oil consumption is increasing. Wouldn’t this shift from net exporter to net importer be a good reason to address growing oil consumption?

During the second quarter of 2006 the UK was a net importer of oil and oil products by 1.6 million tonnes, whereas in the second quarter of 2005 the UK was a net exporter by 1.1 million tonnes.
The picture is similar for gas:
Total indigenous UK production of natural gas in the second quarter of 2006 was 14.4 per cent lower than in the corresponding quarter a year earlier. In the second quarter of 2006, the UK reverted to being a net exporter of gas (1.2 TWh).


Click to enlarge.

In contrast to oil, gas demand is however falling. Total gas demand was down 7.9 percent whilst gas used for electricity generation was 14.1 per cent lower than in the second quarter of 2005 and domestic use 3.3 per cent lower. The domestic falls were attributed to milder weather in 2006 compared to 2005.

The bulk of the reduced gas consumption is being replaced with increased use of imported coal:

Coal supplied 10½ per cent more electricity than in the same period a year earlier, while gas supplied 14 per cent less.
The reality of this situation can not be masked indefinitely. As depletion drives imports the impact on the macro economy will grow. It is inevitable that UK energy consumption will fall over the next decade, for this reason the UK urgently needs a policy of energy consumption reduction rather than the current (lack of?) policy which can't avoid reduction but rather will achieve it through disruptive demand disruption as the cost of imported energy spiral.

UK Energy Trends, Q206

PDF version

9 comments

Nick Rouse on October 1, 2006 - 9:23am Permalink | Comments top
Not only is production falling, so is exploration.

According to DTI Energy Trends Table 3.7 the number of offshore exploration and appraisal wells has fallen from 17 in the second quarter of 2005 to 12 in the second quarter of 2006 and the number of offshore development wells has fallen from 73 to 57 over the same time period. The small onshore effort has also fallen.

Given that new finds tend to be smaller and the success rate in exploration wells lower despite better survey technology, a massive increase in exploration effort would be needed just to stand still. It does not bode well for new finds slowing the rate of decline in production as the old fields fade.

It is not easy to tell if this is due to absolute pessimism about the prospects of the UK continental shelf  by prospective explorers or competitive bidding for rigs and personnel in the rest of the world.

andyh on October 1, 2006 - 9:48pm Permalink | Parent | Comments top
Isn't some of it at least down to that idiot Brown in No11 Downing Street? I thought recent tax changes he made to the North Sea regime penalised future exploration/development; at least the oil firms were not at all happy about it as I recall.
I suppose his typical tax grab may have the unexpected benefit of keeping the oil in situ for longer.
Nick Rouse on October 2, 2006 - 3:41pm Permalink | Parent | Comments top
Yes, but he made up for this by going to OPEC and telling them that it was their duty to produce more oil. So that's alright then.
MUDLOGGER on October 2, 2006 - 3:49pm Permalink | Parent | Comments top
Tax has played a part in suppressing activity. But there are other culprits too.

1. Rig Count: During the 90's and into this decade, the rig utilisation rates were quite poor and a lot of rigs left the UKCS , never to come back. A few have come in since, but not in the same numbers.
What rigs stayed, are now fully utilised and look to remain so for the next two years + . But, the numbers available are not the same as the halcyon days of the 80's.

  1. People: There is a world wide shortage of experienced hands. Many left the UKCS in the 90's and 00's to work elsewhere, when work was hard to find. Again, a lot have not come back.
  2. Opportunity: Oil Majors have little to explore for in the UKCS. New entrants of course have filled the gap, but share buy-backs seemed to be a better way of spending money than exploration. The alternative of 'drilling on Wall Street' led to the acquisition activity of the 90's and early 00's.
  3. Risk: Rig and manpower and entry costs have ramped up. Gordons tax raid created uncertainty and the North Sea + Atlantic margin is a high cost area. So exploration dollars go to areas where there is lower cost and a reasonable chance of finding an elephant.

No amount of drilling is likely to reverse the UK trend. There are occassional reasonably sized finds, such as Buzzard, and in-field, extended reach drilling from existing infrastructure can extend lives of fields, but  short of a miracle, the trend is unlikely to be reversed.
New Forties, Brents etc are very unlikely. We may drop lucky and find the odd Buzzard.

As for the last 9 years of UKGov, the lack of any coherent energy policy and the hosing of money in foreign adventures and other ego projects will be seen by historians as the greatest catastrophe to ever hit Britain.

Probably since the Romans legged it.

The historians are more likely to be scribbling away by the light of candles than any other light source if we carry on this way.

ziz on October 2, 2006 - 12:54pm Permalink | Comments top
To readers of this excellent site - ie well informed observers, the figure present few surprise, indeed it would not be difficult to arrive at a consensus view for the indigenous energy production for the next 4/8/12/ quarters.

The decline in domestic energy consumption reflects lower industrial activity (and let us be fair, improved productivity) but will be spun as energy conservation beginning to bite (which again, to be fair, with the higher prices will be true) and vindicate Gubment policies.

Expect great jubilation when the Norwegian pipeline is "opened" in London by Tony on October 16th with Norwegian PM Jens Stoltenbergin (although no gas will flow for 12 months) and claims of great Gubment foresight to meet future energy needs.
http://www.hydro.com/ormenlange/en/media_room/news/2006_09/blair_en.html

A public festival will be held in Easington (UK landfall for the pipe) on 14 October, where the whole village will be invited to a huge English tea party.... which I intend to join.

Questions about energy security when 20% of the UK gas / energy will depend on a single 42" x 1,200 Km pipeline will be ignored/ shrugged off / considered insane .

Concerns about coal usage for electricity generation and concern about CO2 production will be forgotten as the EU ETS scheme collapses. Buy shares in Drax....get a wood stove and buy a chunk of forest.

Blue Peter on October 4, 2006 - 7:26am Permalink | Parent | Comments top
[quote]
although no gas will flow for 12 months
[/quote]

Why is this the case? I gather that yesterday's (3rd Oct) negative gas price was due to gas flowing through the pipe (a test), so what is to stop it being used in anger, as it were?

Peter.

ziz on October 5, 2006 - 1:26pm Permalink | Parent | Comments top
This is slightly confusing I admit. Gas flowed throught the pipe at full pressure for testing purposes, from the Norwegian coastal pumping station. The Gas field Ormen Lange will not be flowing commercially until next October. You have of course read all the PR guff indicating that all our energy security concerns are over that the press re-cycle.

Go to the Norsk Link above and you will find a lot of very detailed information about the development of the field, the pipeline etc.,

The story about excess gas and zero prices etc., reflects of course the lamentable state of gas storage available in the UK more than the mild weather - reduced demand.

ashaddock on October 2, 2006 - 3:05pm Permalink | Comments top
"The reality of this situation can not be masked indefinitely."

**
That depends on whether the story is written in the media.  I was reading a major, in depth look at "New Britain" (under the Labor government) in the Financial Times and was waiting patiently up to the end of the fifth and last installment in the series for any mention of energy.

Sadly, I was disappointed.  I could find no reference to the fact that the period of Labor Government (nine years, I think) is the period in which the North Sea has passed over it's production peak and its descent has taken the UK to a net oil importer status.

Thanks for your insightful post on the data.

UK Energy Trends, Q206

PDF version

9 comments