North Sea gas production falls 25%

North Sea gas production has slumped by 25% in the second quarter of the year, an alarming increase in the rate of decline that will cut tax revenues and could put more pressure on government to agree controversial shale gas developments.

Figures from the Department of Energy and Climate Change (DECC) also show a 36% rise in coal imports, but a leap from 6.3% to 9.6% for the amount of electricity generated by wind and other renewables.

The department records that the output of oil and associated gas liquids fell by 16% in the three months to the end of June, compared with a year earlier – the biggest decline since records began 16 years ago.

This left Britain importing 3.6m tonnes of oil in the second quarter, compared with 2.8m tonnes in the same period of 2010, even though total oil demand fell by 1.7%.

But the largest fall was in the amount of gas produced from the southern North Sea, where operators have been arguing that projects may have to be shut down because of a rise in government taxes in the last budget.

Malcolm Webb, chief executive of the industry pressure group, Oil & Gas UK, said: “On the face of it, a production decline of this magnitude is extremely worrying and we need to investigate and fully understand what has happened here.

“For the sake of the UK’s economy and its energy security, we should be doing everything we can to encourage sustained investment in our nation’s oil and gas resource to slow the decline and prolong the producing life of fields.”

In a typical year, the annual rate of gas decline has been closer to 15%, and the increase may partly be put down to field maintenance being brought forward, but it comes as domestic prices have been raised by British Gas and others.

There is also mounting excitement and alarm about onshore shale gas, following drilling in Lancashire by Cuadrilla Resources, a small exploration company which has former BP boss Lord Browne on the board.

Cuadrilla claims it could be sitting on 5.6tn cubic metres (200tn cubic ft) just a few miles from the seaside resort of Blackpool. Two more companies have applied to start drilling in the Mendip Hills behind the historic city of Bath in Somerset.

Environmentalists are deeply concerned about the toxic chemicals used in the extraction process used with shale, while some academics have questioned whether the claims made by Cuadrilla can be justified on the back of only two wells.

Yet other energy consultants were more exercised about the increase in coal imports than the increase in gas brought in by ship and pipeline fron abroad.

Simon Cowdroy, of global energy consultancy WSP Future Energy, said it underlined the need for ministers to put more emphasis on encouraging low-carbon power.

“The government urgently needs to convince investors in both renewables and new nuclear generation that the UK is an attractive proposition for long-term, capital-intensive investments,” he said.

Meanwhile Gordon Edge, director of policy at the RenewableUK pressure group, said it was highly significant that renewable energy now provided almost 10% of the UK’s electricity.

“These statistics show the wind industry making a tremendous contribution to the nation’s energy supply. Wind is now providing enough power to supply nearly three and a quarter million homes in the UK. This will stabilise energy prices, as well as generating tens of thousands of jobs, and helping us to build a new low-carbon economy”.

The Guardian