Select Committee on Trade and Industry Minutes of Evidence


Examination of Witnesses (Questions 656-659)

JOHN WYBREW AND CHRISTOPHER BOLT
TUESDAY 4 DECEMBER 2001

Chairman

  656. Good afternoon, Mr Wybrew. Perhaps you could introduce your colleague and we shall get started.
  (Mr Wybrew) I am John Wybrew, on the board of the Lattice Group, one of the three successor companies of British Gas. We are the parent company of the subsidiary, Transco, which provides the gas transportation infrastructure for the British Gas market, the largest gas market in the European Union. Chris Bolt is the Group Director of Regulation and Public Policy. It may be worth adding that Chris has recently been heading up a major consultation throughout the industry and its consumers to try to get a sense of the projections of gas supply and demand and the implications for Transco's investment in its national transmission system.

  657. That is a good place to start. We were going to ask a little bit about the estimates for UK demand. It has been suggested that around one third will be met from imports by 2010. We have also had other figures which suggest that by 2020 the figure could have risen to 90 per cent, that the depletion rate will have changed at quite a dramatic pace. Would you like to share your thoughts about what is actually going to happen between 2010 and 2020?
  (Mr Wybrew) Because of the consultation we have been conducting, the ideal person to start off on that subject would be Chris.
  (Mr Bolt) The future volume of imports depends both on your projections of demand and supply and there are significant uncertainties on both sides. On the demand side, for example, one of the issues is how fast demand will continue to grow. Will we see more gas-fired power stations as the nuclear capability declines? So, there are uncertainties on the demand side. The same on the supply side. There are possibilities of new discoveries west of Shetland. Whether those will be economic at the sort of gas prices we shall see is yet to be determined. Putting those uncertainties together, the sorts of numbers you have talked about, the third or so by 2010, are probably a central estimate and we have seen ranges for that figure from as low as ten per cent if demand is low and alternative UK supplies are high, up to approaching 50 per cent even by 2010. The issue for us is to make sure, depending on where that gas arrives in the UK, given our responsibilities for transporting it from the beach, that there is sufficient onshore capacity in the transmission network. We are not directly involved in the offshore side or in securing long-term gas contracts for future imports but we do have to be alert to those uncertainties.

  658. You operate at Bacton, do you not?
  (Mr Wybrew) Transco operates the terminal which receives gas from the producers at Bacton.

  659. It has been suggested that until such times as the gas market, and indeed the electricity market, are liberalised, there is a possibility that people like Ruhr Gas who have virtually a stranglehold on the European grid as it comes from the East, could well frustrate some of our requirements, not on the basis of switching the lights off in Britain but having been confronted with a challenge to their own supplies, to say they have first call on this. How relaxed are you about that? Do you think you would be able to meet your requirements and duck and dive and get the necessary supplies of gas?
  (Mr Wybrew) We are very concerned about that. We are concerned about it because the likes of Ruhr Gas and indeed the other major continental suppliers to their continental markets foreseeing Europe's increasing need for gas imports from remote sources are inevitably looking at long-term contracts to give them long-term security of supply. The British consumers and the British market need major international energy companies like Shell or BP or Exxon Mobil or Centrica to be encouraged to undertake the same international activity to procure the gas long term, that in time we ourselves will need. They will not be encouraged to do that until they face a composite European transmission network which is efficient and allows their gas, once procured, to flow efficiently and openly across the network and not be frustrated by barriers created by individual monopolies protecting their monopoly position in France or Germany or anywhere else.
  (Mr Bolt) Last winter we saw imports on peak days, so as a nation we are already relying on imports on peak days; by 2005 we are expecting to see imports in average winter conditions. The issue between 2005 and 2010 is how far the increasing need for imports is met from additional gas from the Norwegian sector which might well come in at St Fergus, where a direct commercial relationship, without those links through continental Europe, could secure supplies. We have already seen BP contract with Norway for deliveries of Norwegian gas. But, even if that covers the period 2005 towards 2010, from that point onwards we are expecting to see imports coming from further afield and those issues about how it gets transported through continental Europe become much more of a concern.


 
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