The UK Government has scrapped plans to pump £750million into new gas storage facilities – saying the country does not need them.
Energy Minister Michael Fallon announced he was abandoning the proposed subsidy at Offshore Europe yesterday, just 24 hours after Chancellor George Osborne told the same audience he was doing everything he could to support the energy industry.
The decision goes against the advice of industry body Oil and Gas UK, which has been calling for more gas storage to make sure the lights stay on in the UK when North Sea production is hit.
But last night Mr Fallon told the Press and Journal that he was confident that the UK won’t face any supply shortages in the coming months and years.
This is despite concerns that any long-term problem with offshore helicopters could cause supply issues within a matter of months.
The minister said the UK has the capacity to deliver twice the amount of gas required in a normal winter and has coped well with recent extreme winter conditions, countering any fears about supply shortages.
“We have looked very hard at the amount of gas we need, and the amount we need to store,” he said. “We have been doing that all year.
“The study concluded that it was not worth doing. We have multiple sources of gas, we are not just reliant on the North Sea. We get gas from Norway, and we have other sources of energy as well.”
Mr Fallon said the decision will save bill-payers possible subsidy costs of £750million over the next decade.
Gas supplies are increasing across the world, and the minister said it was easier to import additional supplies if needed.
“The government is committed to doing all it can to help consumers reduce energy bills, and there is no benefit in further expensive subsidies when the market is working,” he said.
“It is up to industry to get on and invest in building gas storage, and they are doing so. Two gas storage facilities have recently been built and two more are under construction.”
The government pointed out that there a further 12 projects are in the pipeline.
A spokeswoman for Oil and Gas UK said: “It is likely that the UK will need more storage in future, as UK production declines further, but storage is not the only way to achieve security of supply; there are other means as well.
“Storage does not come cheaply – it is expensive. So far, the gas market has delivered both much new investment and security of supply.”
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