Where does the UK get its supply of business gas?
The UK gets its gas from different sources to ensure supply is never in danger of running out. But in an ever-changing world, guaranteeing a constant supply for businesses is a real challenge.
Gas reserves globally are quickly being depleted. Today, governments worldwide seek to extend the life of our remaining fossil fuels until we’re no longer dependent on them.
In this guide, we explain how suppliers meet these challenges to keep our businesses running smoothly.
How much gas comes from the UK?
Natural gas from the North Sea and the Irish Sea makes up around 45% of the required total in the UK. But the quantity is declining year by year as the gas in our fields is being used up.
There have been attempts to create new UK sources of gas by using pressurised water (fracking) to release it from the shale deposits in sedimentary rock. There are three sites in the UK that are earmarked for this: one in Scotland and two in England.
However, attempts to start the extraction have been controversial with environmental campaigners, and fracking has been placed on hold in the UK.
It’s a different story in the US. The Americans are now producing vast quantities of shale gas; their success has prompted several other countries to investigate similar options.
How much gas comes from overseas?
Imports from around the world make up the shortfall in our domestic supply. Pipelines under the North Sea deliver Liquefied Natural Gas (LNG) from Norway, the Netherlands and Belgium to ports along the east coast.
Since 2005, the UK has shipped LNG into storage facilities around the country. It’s sourced as far afield as Asia, the Middle East and Russia, depending on the price charged at the time of purchase.
As the UK’s natural gas reserves lessen, we become more and more dependent on buying our supplies from countries with an abundance of gas. Shale gas has made a welcome addition to global gas reserves, giving more time to scale renewable energy sources to the required levels.
How does where we get our gas affect its price?
The two primary sources of low-cost gas for the UK are the UK gas fields and Norway.
As the distance from the UK increases, so do the costs of transportation. Shipping LNG long-distance incurs heavy overheads. Home-produced gas will always be the cheapest way to power our businesses, but the UK is preparing for its reserves to come to an end. As the gas fields begin to dry up, gas prices will start to increase, having a knock-on effect on the price of goods and services.
You can read about other factors that affect gas prices in our guide What influences UK gas prices?
Is the UK’s gas supply changing?
The UK's gas supply is subtly changing over time. Coal-fired power stations providing cheap electricity are giving way to gas-fired alternatives en route to putting a stop to our reliance on coal.
Switching from coal to gas
Because coal is a significant pollutant, we’ll dramatically cut down on our emissions by using gas instead.
As part of the UK’s strategy to plan for short-term high demand periods, we store gas in hot summers. Depleted gas fields and vast salt caverns are re-purposed to store these emergency reserves.
The post-Brexit UK is a very different place from what we have been used to for many decades, and we've still no idea how the split with the EU will affect our economy. But we're no longer in the position we were as a member of the EU, which guaranteed us receiving emergency gas supplies at a preferential rate from other EU members.
An immediate impact has been the change in protocols and paperwork created by our exit from the EU. It remains to be seen what other changes will happen going forward. To find out more about the impact of Brexit on the energy market, check out Why business energy prices will go up after Brexit.
The Covid-19 pandemic has had the biggest impact on energy businesses in modern times. Planes grounded, businesses closed, and people locked down in their homes have led to an unprecedented drop in demand for commercial gas and other products.
During a stop-start year, many businesses were forced to close. The closures cause a domino effect. A large company closing can affect thousands more down the supply chain.
Energy supply companies are faced with the ensuing bad debts caused by the pandemic. At the same time, they need to keep consumer price rates at a reasonable level — likely with the help of government subsidies.
The good news is that regulators and consumers will be scrutinising how energy companies have dealt with their customers over this difficult time. They’ll take action against those perceived to have been 'unfriendly', so in the long term, the most caring companies will thrive. That’s always good for the customer.
What does this mean for UK businesses?
In the short term, global reserves of gas are very healthy. They’ll be able to power the world for several decades to come, assuming that demand does not increase.
However, consumption started to go up before the pandemic. China accounted for over a third of this growth, potentially speeding up the current depletion rate. The fall-out from the pandemic will be evident for many years, and it’s not easy to predict how the world will emerge from it. It is hoped that there will be less reliance on fossil fuels, such as gas, and more emphasis on renewables.
Our love affair with the efficiency and convenience of gas cannot continue forever. Now is the time to look at your energy demands and consider what you can do to be less reliant on fossil fuels.
Change the way your business uses gas
In the short term, check out what your business is currently paying for gas to keep the company going. Are you paying way over the odds? Does your supplier offer fixed rate deals? Discover whether you can reduce your payments by swapping to another energy provider.
If you’re currently in a fixed-rate contract, could you change to a lower payment scheme that would outweigh your cost to leave? Do you need all the space you have, or could you downsize and have staff working from home?
Small changes could go a long way: low energy bulbs, solar panels or even a small wind turbine to generate electricity. Whether you work as a sole trader, run a small business, or oversee a blue-chip company, making these changes can help both the environment and your bottom line.
Get in touch with the Bionic team for more information or to discuss your needs or learn more about business gas from Bionic.