Operators chart cost of U.K. gas production curbs

U.K. offshore operators, fearful of the U.K. government's forthcoming energy review, have charted potential losses from anticipated gas production curbs. The industry was given until July 20 to respond to proposed reforms, which include encouragement of coal-fired power projects in preference to gas-fired in a bid to ensure diversity of fuels (OGJ, July 6, 1998, p. 35).

July 27, 1998

2 min read

U.K. offshore operators, fearful of the U.K. government's forthcoming energy review, have charted potential losses from anticipated gas production curbs.

The industry was given until July 20 to respond to proposed reforms, which include encouragement of coal-fired power projects in preference to gas-fired in a bid to ensure diversity of fuels (OGJ, July 6, 1998, p. 35).

U.K. Offshore Operators Association (Ukooa) hired analyst Arthur D. Little Ltd., London, to study how restricting gas-fired power generation would affect development of new gas fields and subsequent capital and operational expenditures.

The study showed that, without government curbs, U.K. gas demand for power generation is expected to grow from 2.1 bcfd now to 4.2 bcfd in 2010, through construction of 49 new combined-cycle gas-fired power plants with total capacity of 23,000 MW.

Ukooa Director-General James May said, "The report confirms our fears, voiced at the time of the government announcement at the end of June, that continued restrictions on gas-fired power generation would have a serious impact on investment and jobs in the gas industry."

Ukooa said deferral of gas field developments to feed the anticipated power plants would reduce exploration spending by £700 million ($1.2 billion) to 2010, delay investment in new gas fields of almost £2 billion ($3.2 billion), reduce the government's tax revenue by £1.8 billion ($2.9 billion), and lead to loss of 1,300 jobs in the offshore sector.

In addition, said Ukooa, the move would delay investment in onshore electric power generation plants totaling £3 billion ($4.8 billion) by 2002.