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what does the future hold for the UK’s gas supply post-Brexit? Will the gas run out?

28 March 2018

As the UK is in the midst of negotiations on Brexit, the future of the UK’s energy trading positon post-Brexit has been shrouded in uncertainty. It is the general consensus of most UK energy sector participants, as highlighted by the recent Energy UK‘s paper, that the UK should: "maintain a close trade relationship through regulatory alignment with the Internal Energy Market, maintain the Single Energy Market on the Island of Ireland and work closely together with the EU to tackle climate change". There have been significant pessimistic implications thrown around as a result of Brexit, the worst being that the UK will experience energy shortages post-Brexit. This is scare mongering and simply does not stand up to reality of the UK’s gas supply. Statistical analysis of gas sector, interconnectors that are unaffected by Brexit and market dynamics driving energy supply to the UK are three key explanations why there will be a continual flow of gas in the UK.

The UK currently produces enough gas to meet almost half (43%) of its needs from the North Sea and the East Irish Sea, and significantly Norway and other EU members provide 44% of gas to the UK and the remaining 13% comes from liquefied natural gas (LNG) tankers.

The state of the North Sea oil and gas industry has continuously been questioned on whether a long terms supply of oil and gas is realistic. PWC have produced a report on North Sea oil that interviewed key stakeholders from the UK, Norway and the Netherlands. It highlights the longevity of North Sea oil but only if it is subject to significant reform that would require greater collaboration among offshore operators to maximise efficiency savings, sharing risk and coordination of smaller oil fields. Furthermore, last December Steve Phimister, Shell’s upstream vice president for the UK, provided a positive future outlook on North Sea oil and gas for the next decade and beyond.

As a result of a significant portion of the gas imported from Europe coming via Norway, it is evident that the interconnector between Norway and the UK will be mostly unaffected post-Brexit. This is because Norway is a non EU member state and although a member of the European Economic Area, it will not preclude Norway from supplying gas to the UK post-Brexit. Furthermore, Satoil ASA, Norway’s state owned gas producer, has emphasised repeatedly that it can divert more fuel to Britain if needed.

With regards to LNG imports, although they are significantly lower than domestically produced gas, there is no major reason why these cannot be increased if necessary. LNG is mostly imported into the UK from Qatar and energy minister Mohamed bin Saleh al-Sada has stated that they view Brexit as a good opportunity for Qatar and “[they] will always be there to supply the energy required. Certainty we can contribute to the UK’s need”. The three UK LNG import terminals are underused and could deliver at full capacity 50% of the UK’s gas needs.

To answer the question: no the gas won’t run out. Oil and gas from Norway, the North Sea and the safety net provided by LNG imports from Qatar will continue to supply the gas demands of the UK. However, two unanswered questions that may provide a significant problem is:

  1. what mechanisms will be put in place to provide the 40-60% of the Republic of Ireland’s gas demand supplied from Scotland
  2. a significant portion of the UK’s work force derives from the EU, so what will be the policy on free movement and what impact with this have on energy sector workers?

The legal structures are yet to be decided, and we will provide an update when the questions have answers.

Brexit and beyond: navigating the challenges ahead

Our Brexit hub provides useful information on the key areas that are likely to be affected by Brexit, the priority issues for any business or organisation and practical guidance to help you navigate the challenges ahead.

Visit the Brexit hub >

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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