New UK energy bill calls for simpler regime

The UK's new energy bill calls for a simpler regime for offshore gas supply infrastructure so energy companies can invest with greater clarity and with reduced costs and risks, the government said on Jan. 10.

Jan 14th, 2008

Uchenna Izundu
International Editor

LONDON, Jan. 14 -- The UK's new energy bill calls for a simpler regime for offshore gas supply infrastructure so energy companies can invest with greater clarity and with reduced costs and risks, the government said on Jan. 10.

Admitting the present regime was complex and a "barrier to investment," the UK said it was determined to bolster gas supply security as it prepares to import more than half of its needs by 2020.

The bill will propel smaller players in the North Sea into offshore oil and gas decommissioning by ensuring adequate environmental and taxpayer protections, the government said.

Energy companies also will be encouraged to invest in carbon capture and storage to help address climate change, and the government will create a licensing regime for storing carbon dioxide offshore. Decommissioning costs are estimated at £15-19 billion, with 500 oil and gas installations in the UK North Sea and more than 6,000 miles of pipeline.

Oil and Gas UK, the trade association, cautiously welcomed the proposals, saying it initially appeared to "simplify and strengthen the regulatory framework to give investors more clarity and certainty in the areas of offshore gas infrastructure, licensing, and decommissioning."

The UK also has proposed a fleet of new nuclear power stations to enhance the country's energy security and reduce carbon emissions, with new plants possibly in operation by 2020.

The controversial measure, condemned by environmentalists, would be paid for entirely by energy companies. Each station, to be developed on existing or shut-down nuclear sites, is estimated to cost £1.5 billion. Companies will pay the full costs of decommissioning and their full share of waste management costs.

Welcoming nuclear power into the energy mix is a complete change of attitude, as the governing Labor party initially described going nuclear as "an unattractive option" in 2003. High oil prices, however, have made nuclear power a much more attractive option.

But as other countries continue to build nuclear fleets—with more than 30 reactors under construction, and over 90 ordered or at advanced stages of planning—the UK will need to compete to draw investment for resources, components, and capital.

Tony Ward, utilities director at Ernst & Young said, "The implementation of projects that will result in operational reactors before 2020 will depend on whether or not government policy and commercial environments remain robust. Speed, clarity, and continued confidence will be the key to success for any UK projects," he continued. "The global market is vibrant and hence there is great competition—the UK will need to work hard to remain an attractive option."

Contact Uchenna Izundu at uchennai@pennwell.com.

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