Pushing the boundaries to find petroleum
Storing the Gas the UK Needs
Most industry pundits agree that, given current global consumption of just over 100Tcf per year increasing to around 160Tcf per year by 2030, the world has between 60 and several hundred years of conventional and unconventional natural gas remaining. This being so, it seems reasonable to expect that gas will be joined with ‘clean coal’, nuclear and renewables in a sensible UK government strategy looking forward to a more environmentally-friendly, secure and cheaper energy future for the UK.
In contrast with the last 40 years or so, even by 2015 the UK will be importing the majority of its gas, either by pipeline from Norway and Russia or as LNG from North and West Africa and the Middle East. Ignoring the geo-political issues associated with the country’s shift from self-sufficiency to dependency, whilst new import terminals have been or are being built to enable the import of gas to replace our own domestic production, actually there remains no guarantee that the gas flows can be managed to meet UK winter needs. Of course the northern winter impacts NW Europe and North America at the same time so gas might be moved to where the price is higher, for example LNG ships could be diverted to the USA.
Gas storage facilities play an important role in managing variable demand and mitigating the need for imports when they are at their most expensive as they can in principle be filled relatively cheaply during times of lower demand to be available at times of higher demand, either daily or seasonally.
What are the main characteristics of gas storage facilities? World-wide there are nearly 500 gas storage facilities (70% of them in the USA) and these are in either depleted oil/gas fields or salt caverns or aquifers: 75% of facilities are based on depleted fields.
Depleted fields have four or five significant advantages as storage facilities. Firstly, they are low risk as they have a proven hydrocarbon containment capability over geological time. Secondly, they have significant storage capacity. Thirdly, much equipment – wells, platforms, processing plant, pipelines, terminals – is already in place (though requiring further investment). Fourthly, the sub-surface, petroleum engineering, drilling and so on skills and “Know How” required to identify, develop and operate such facilities are already available in the oil & gas industry. Finally, salt caverns have to be created by leaching and are roughly twice as expensive to develop compared with utilising depleted fields.
Centrica have long since proved with the Southern North Sea Rough facilities that it is possible to develop and operate a successful offshore gas storage business.
What’s clear from the Rough example and the extensive USA experience is that the technology of gas storage is not especially challenging, especially to an industry that can contemplate developing reservoirs at depths of 6000m in a couple of thousand metres of water!
The USA has used its heritage of oil & gas infrastructure, mainly onshore, supported by sensible Federal fiscal policy and pragmatic State planning authorities, to move ahead with gas storage in well-known reservoirs, at negligible risk.
The UK also has a heritage of oil & gas infrastructure, mainly offshore, and has had an endowment of gas, the very depletion of which offers the opportunity to move ahead vigorously with gas storage in well-known reservoirs, at negligible risk. However, the UK is unusual in having a relatively low amount of storage compared say with France and Germany and in being very dependent on a single facility – the Rough storage facility comprises more than 80% of UK storage capacity and 10% of peak demand.
What really seems to be missing is the strategic thinking and fiscal encouragement to give gas storage developers the certainty that they will see proper financial returns over the multi-decade lives of such facilities: in this sense, gas storage is yet another victim of the present UK government’s evident vision of the oil & gas industry as simply a ‘cash cow’.
Elsewhere (www.oilvoice.com/open/LatestColumns.aspx ), I have penned a longer article on Gas and Gas Storage.
In contrast with the last 40 years or so, even by 2015 the UK will be importing the majority of its gas, either by pipeline from Norway and Russia or as LNG from North and West Africa and the Middle East. Ignoring the geo-political issues associated with the country’s shift from self-sufficiency to dependency, whilst new import terminals have been or are being built to enable the import of gas to replace our own domestic production, actually there remains no guarantee that the gas flows can be managed to meet UK winter needs. Of course the northern winter impacts NW Europe and North America at the same time so gas might be moved to where the price is higher, for example LNG ships could be diverted to the USA.
Gas storage facilities play an important role in managing variable demand and mitigating the need for imports when they are at their most expensive as they can in principle be filled relatively cheaply during times of lower demand to be available at times of higher demand, either daily or seasonally.
What are the main characteristics of gas storage facilities? World-wide there are nearly 500 gas storage facilities (70% of them in the USA) and these are in either depleted oil/gas fields or salt caverns or aquifers: 75% of facilities are based on depleted fields.
Depleted fields have four or five significant advantages as storage facilities. Firstly, they are low risk as they have a proven hydrocarbon containment capability over geological time. Secondly, they have significant storage capacity. Thirdly, much equipment – wells, platforms, processing plant, pipelines, terminals – is already in place (though requiring further investment). Fourthly, the sub-surface, petroleum engineering, drilling and so on skills and “Know How” required to identify, develop and operate such facilities are already available in the oil & gas industry. Finally, salt caverns have to be created by leaching and are roughly twice as expensive to develop compared with utilising depleted fields.
Centrica have long since proved with the Southern North Sea Rough facilities that it is possible to develop and operate a successful offshore gas storage business.
What’s clear from the Rough example and the extensive USA experience is that the technology of gas storage is not especially challenging, especially to an industry that can contemplate developing reservoirs at depths of 6000m in a couple of thousand metres of water!
The USA has used its heritage of oil & gas infrastructure, mainly onshore, supported by sensible Federal fiscal policy and pragmatic State planning authorities, to move ahead with gas storage in well-known reservoirs, at negligible risk.
The UK also has a heritage of oil & gas infrastructure, mainly offshore, and has had an endowment of gas, the very depletion of which offers the opportunity to move ahead vigorously with gas storage in well-known reservoirs, at negligible risk. However, the UK is unusual in having a relatively low amount of storage compared say with France and Germany and in being very dependent on a single facility – the Rough storage facility comprises more than 80% of UK storage capacity and 10% of peak demand.
What really seems to be missing is the strategic thinking and fiscal encouragement to give gas storage developers the certainty that they will see proper financial returns over the multi-decade lives of such facilities: in this sense, gas storage is yet another victim of the present UK government’s evident vision of the oil & gas industry as simply a ‘cash cow’.
Elsewhere (www.oilvoice.com/open/LatestColumns.aspx ), I have penned a longer article on Gas and Gas Storage.
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