Wednesday, 29 May 2013

June 2013 Quick Notes: Britain’s Energy Security

To see parliamentary report on the subject:

http://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=1&cad=rja&ved=0CD4QFjAA&url=http%3A%2F%2Fwww.parliament.uk%2Fbriefing-papers%2Fsn04046.pdf&ei=TO5SUeDnFoLfOf2VgfgJ&usg=AFQjCNE82P8aLdSGLORP3Hg4IHu4UFuYow&sig2=5uHI1ck8vJUoSZdg0AwKaw&bvm=bv.44342787,d.d2k

Analysis

Imports

·         Britain since 2004, and more often than not since 1970, has been a Net Importer of energy (apart from two periods…1980-1989 & 1994-2004 – when it was a Net Exporter) – this means Britain is dependent upon supplies from countries other than itself to be able to keep the lights on, its homes warm and to cook its dinners.

·         Currently Britain imports 10% of the coal used, 10% of the Petrol used, 17% of natural gas used by its citizens.

·         Britain even imports electricity directly from France and Ireland, with France alone providing 0.6% of the total British primary energy supply

·         The value of difference between imports/exports of energy puts Britain £21Billion into the deficit as of 2011; simply put about £58million more is spent every day importing energy, than is received from exporting it.

Sources

·         Gas comes to Britain in two ways:

o   There are three pipelines/links to Norway that provided 41% of the UK’s gas imports in 2011, and a pipeline to the Netherlands that was also used to import gas.

o   Furthermore Liquefied Natural Gas (LNG) is also imported through two ship terminals[1] which were opened in 2009: during their first year these terminals provided for 25% of all imports, by 2011 gas imported from Qatar accounted for 40% of total gas imports.

o   Overall the pipelines are the more efficient way of transferring energy; but the LNG ship terminals do allow for a diversification of supply, something which is important when it’s predicted that Gas will account for 27% of the total energy supply in 2030.

·         Coal comes from a broader supplier base than gas:

o   Russia (38%) - the supply from Russia peaking at 21 million tonnes in 2008, however in 2011 it accounted for 12 million tonnes

o   Columbia (25%), US (19%)

o   All is brought in by ship.

·         Oil is again more diversified than gas:

o   Britain imports 54 million tonnes of oil a year

o   67% (36 million tonnes) of the crude oil used by Britain comes from Norway

o   8% comes from Russia, 7% Nigeria, 5% Algeria

o   Britain though does export oil, principally to the Netherlands, Germany, US and France; mainly this is refined oil, so the crude has been broken down (cracked) into its useful, and therefore more valuable, parts.

o   Again the vast majority moves by ship.

Strategic Reserves

·         Because of its historic reliance on the North Sea’s now diminished gas supply, the UK has a much lower level of storage capacity than many other countries.  Britain has the ability to store just 20 days’ supply of gas, compared to 103 days in France, 92 days in Germany and 70 days in Italy.[2]

·         Considering Britain’s emerging reliance upon LNG imports, and the 20 days allowance that is made in reserve – Britain now needs a LNG carrier to dock at one of its terminals every day. As the recent problems have shown[3]; when there is increased use the system is put under significant strain. Currently imports are required to provide roughly 10hrs or more of energy every day[4]. Although so far the pressures of supply emergencies have been dealt with: so far there has been no significant logistical problem, the Somali pirates did not really affect the route and there have no delays – but should three weeks go by, with no ships docking, then Britain would be in serious trouble.

·         Oil is just as low in terms of reserve: with an import level average (between 2007 and 2011) of 56,791 thousand tonnes of oil every year. This figure equates to a daily consumption of over 1.14million barrels[5]. Again as with gas, without daily dockings of crude carriers Britain would run out of energy.

Security of Supply

·         Whilst the often used quip, “the countries supplying the energy have to supply it because they need the money” is true…wars are not started (usually) by rational people, and even short of war, there is no reason to believe that logic and/or money will always speak the same.  

·         Pipelines are like air fields, roads and ports – they are fixed thing objects, findable using Google maps[6]. Anything which is able to be found, by definition must be able to be interfered with. Whilst undersea pipelines are very difficult to get at giving them a level of security; that same advantage also means that any problems which happen (even those non-man-made) are tremendously difficult to fix. Problems don’t happen often, but when they do they are expensive, time consuming and considering the reliance upon imported gas and oil bad for the economy.

·         Qatar is currently evolving its constitution but is also reacting to an Arab Spring of its own[7]: this means that with Britain’s dependence upon LNG from Qatar being so high the situation must always be watched closely so as to avoid any problems which might result from leadership changes.

·         Britain’s oil imports from Africa are probably the most likely energy source to be disrupted; although so far they have proved consistent.  

o   Russia of course is not above using its energy super power status to strengthen its hands in negotiations; therefore whilst it is not as massive a percentage of Britain’s energy supplies as Qatar is, the current levels of reserves maintained should not allow the government to feel comfortable.

·         Most of Britain’s gas supply, some of its oil, and much of her allies’ oil supplies pass through the Straits of Hormuz, as well as some of the other 5 maritime choke points – meaning Britain’s strategic situation is complex, and requires constant attention & resources. However, for Britain a sudden rise in cost caused by a drop in energy supply would be almost as bad for the economy/national security as a direct attack on Britain’s supply; especially if it lead to the sources of energy that the economy is reliant upon being pooled/procured by others with more money/greater levels desperation.

Conclusion: How Secure is Britain’s Energy?

·         In short: Britain’s energy is not that secure - the system was designed around best commercial practice, which is not necessarily best strategic practice, and therefore it is lacking in ‘slack’ to take up any disruption.

·         Diversification of energy supply sources should be the order of the day. Ideally this would be capitalising upon technological leads in renewables and nuclear power to provide Britain with as much of its own energy as possible to minimise disruption that could be caused by any upset in supply. However, as problems with getting the funding for new nuclear plants have shown (and they haven’t even started to be built) the British government is not necessarily geared up for these problems.

·         Finally Britain has a real problem in terms of what it can do; for the last 50 years or so Britain governments have based a lot of the country’s energy strategy/’insurance’ upon a multi-national pooling energy security. This has been primarily amongst allies proving sea security and multiple sources providing security of supply. Unfortunately, Britain does not seem to be using multiple sources anymore (mainly relying upon Norway, Qatar and Russia), and we & our allies are disarming[8] - some would say in the face of increasing threats.


[1] These are where the vessels, known as LNG Carriers, can dock and load/offload their cargo.
[4] Currently depending upon the size of the carrier, as each vessel only carries (depending upon its size) between 6 and 12 hours energy supply



Extra Info

From Report for Phoenix Think Tank report by Author: Reshaping the Argument

Secure Sea Lines of Communication out to 1000nm from Britain’s coast, maintain an appropriate independent intervention capability allowing for defence/securing of overseas territories and ability to choose as to conflict involvement.

Why does this statement work for Britain;

1)      With Britain dependent upon imports, especially of energy in the form of Liquefied Natural Gas – the ability to protect those routes up 1000nm away from our shores means that British governments could be pretty sure of their continual arrival and of their ability to deal with any problems along the route – which it would be able to do as any naval force self-sufficient enough to operate 1000nm away from home can easily deploy 8000nm or even further away if necessary – as the Japanese regularly demonstrate with their deployments to gulf and to counter-piracy operations of the coast of Somalia.



Figure 1: The total British Exclusive Economic Zone, the 5th largest in the world, this map comes from Wikipedia




Figure 2: The British Exclusive Economic Zone around the British Isles, this map also comes from Wikipedia

2)      Britain has the 5th largest exclusive economic zone out of all the countries in the world; this is larger than Japan’s, Canada’s, Brazil’s, even China’s. However, if a nation can secure its trade out to 1000nm, it can secure it EEZ out the 200nm from its own shore line and from that of its overseas territories. Why is this important though? Well figure 2 (on the previous page) shows why, as its under Britain’s blue that a lot of North Sea Gas was found, under other blue areas around the globe in figure 1 are deposits of oil, gas, coal, iron, copper, silicon, gold and many more materials. These are things which the British economy is dependent upon, which the world economy is dependent upon and which the access to are of crucial importance to lives of Britain’s citizens.

3)      This links nicely into the reason for having an independent intervention capability; after all currently three of Britain’s Over Seas Territories are under dispute, two in the South Atlantic and Gibraltar…now whilst its extremely unlikely almost unthinkable (disputes over flags not withstanding) for war to break out with Spain over the issue; we cannot see the future and what conflicts it will bring (who 12 months ago would have predicted the wave of uprisings in the middle east and north Africa) - therefore maintaining the capability to carry out an intervention independently that can be used for Britain’s own requirements or perhaps slotted into a multi-national force for larger operations.

4)      The statement also fulfils the wider role of the capability required to achieve it, and the attendant personnel, vessels, aircraft and other equipment is just as useful for Britain to deploy in situations such as the Japanese Tsunami, the recovery of stranded British citizens in the cases of the Icelandic Volcano/Ash Cloud and evacuations from countries in uprising as HMS Cumberland achieved in Libya.


 

Taken from Government Report
 

UK Government Data on Supply

3.5  Supply and disposal of petroleum(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Thousand tonnes
 
 
2007
2008
2009
2010
2011
 
Primary oils (Crude oil, NGLs and feedstocks)
 
 
 
 
 
 
  Indigenous production (2)
76,575
71,665
68,199
62,962
51,972
 
  Imports
57,357
60,041
54,387
54,587
57,586
 
  Exports (3)
-50,999
-48,401
-45,202
-42,196
-33,745
 
  Transfers - Transfers to products (4)
-2,754
-2,800
-2,618
-2,306
-2,141
 
                    Product rebrands (5)
+547
+208
+16
+232
+155
 
  Stock change (6)
+784
+234
+545
-39
+611
 
  Use during production (7)
-
-
-
-
-
 
  Calculated refinery throughput (8)
81,509
80,947
75,327
73,239
74,438
 
  Overall statistical difference (9)
32
208
102
39
-271
 
  Actual refinery throughput
81,477
80,740
75,225
73,200
74,709
 
 
 
 
 
 
 
 
Petroleum products
 
 
 
 
 
 
  Losses in refining process  (10)
293r
315
330r
329
213
 
  Refinery gross production (11)
81,184r
80,425
74,895r
72,871
74,496
 
  Transfers - Transfers to products (4)
2,754
2,800
2,618
2,306
2,141
 
                    Product rebrands (5)
-547
-208
-16
-232
-155
 
  Imports
25,110r
24,186
22,172r
23,979r
22,804
 
  Exports (12)
-29,983r
-28,791
-25,733
-26,065
-27,800
 
  Marine bunkers
-2,371
-2,594
-2,490
-2,139
-2,296
 
  Stock changes (6) - Refineries
1,067
-3r
421
577
46
 
                                 Power generators
+5
+127
-101
+26
+142
 
  Calculated total supply
77,220r
75,942r
71,766r
71,323r
69,378
 
  Statistical difference (9)
-204r
72r
-102r
150r
-109
 
 Total demand (4)
77,424r
75,870r
75,870r
71,173r
69,487
 
  Of which:
 
 
 
 
 
 
  Energy use
69,456r
67,838r
64,502r
63,644r
62,232
 
     Of which, for electricity generation (13)
1,126
1,575r
1,568r
1,143r
832
 
                      total refinery fuels (13)
4,676r
4,752
4,399
4,474r
4,391
 
  Non-energy use
7,967
8,032r
7,365
7,530r
7,255
 
 
 
 
 
 
 
 
(1)   Aggregate monthly data on oil production, trade, refinery throughput and inland deliveries are available - see paragraph
 
       3.73 and Annex C.
 
 
 
 
 
 
(2)   Crude oil plus condensates and petroleum gases derived at onshore treatment plants.
 
 
 
(3)   Includes NGLs, process oils and re-exports.
 
 
 
 
 
 
(4)   Disposals of NGLs by direct sale (excluding exports) or for blending.
 
 
 
 
(5)   Product rebrands (inter-product blends or transfers) represent petroleum products received at refineries/ plants as process
 
        for refinery or cracking unit operations.
 
 
 
 
 
 
(6)   Impact of stock changes on supplies. A stock fall is shown as (+) as it increases supplies, and vice-versa for a stock rise (-).
 
(7)   Own use in onshore terminals and gas separation plants. These figures ceased to be available from January 2001 with
 
        the advent of the new PPRS system.
 
 
 
 
 
 
(8)   Equivalent to the total supplies reported against the upstream transformation sector in Table 3.1.
 
 
 
(9)   Supply greater than (+) or less than (-) recorded throughput or disposals.
 
 
 
 
(10) Calculated as the difference between actual refinery throughput and gross refinery production.
 
 
 
(11) Includes refinery fuels.
 
 
 
 
 
 
(12)  Excludes NGLs.
 
 
 
 
 
 
(13) Figures cover petroleum used to generate electricity by all major power producers and by all other generators, including
 
        petroleum used to  generate electricity at refineries.  These quantities are also included in the totals reported as used as
 
       refinery fuel, so there is thus some overlap in these figures.
 
 
 
 
 
 
 
 
 
 
 
 

 

4.6  Liquefied Natural Gas imports by terminal
 
 
 
 
 
 
 
 
 
 
 
 
 
GWh
 
 
2007
2008
2009
2010
2011
 
LNG Imports via:
 
 
 
 
 
 
 
 
 
 
 
 
 
     Dragon (Milford Haven) (1)
-
-
10,034
19,097
28,365
 
     Isle of Grain (Isle of Grain) (2)
14,861
8,912
50,483
59,770
85,081
 
     South Hook (Milford Haven) (3)
-
-
49,249
124,922
157,287
 
     Teesside GasPort (Teesside) (4)
42
-
813
-
-
 
 
 
 
 
 
 
 
 
14,903
8,912
110,579
203,789
270,733
 
 
 
 
 
 
 
 
(1)  Dragon began importing LNG to the UK in August 2009.
 
 
 
 
(2)  LNG imports at Canvey Island commenced in 1965 but ceased in the early 1980's when, with increasing
 
       supplies from the North Sea, imports were no longer required. UK natural gas production peaked in 2000
 
       and as a result of falling production LNG imports recommenced at the Isle of Grain in 2005.
 
 
(3)  South Hook began importing LNG to the UK in April 2009.
 
 
 
 
(4)  Teesside GasPort was commissioned with a small amount of gas in February 2007.
 
 
 
 
 
 
 
 
 

 
 

US Energy Information Administration

http://www.eia.gov/countries/regions-topics.cfm?fips=wotc&trk=p3

Volume of Crude Oil and Petroleum Products Transported Through World Chokepoints, 2007-2011
Location
2007
2008
2009
2010
2011
Bab el_Mandab
4.6
4.5
2.9
2.7
3.4
Turkish Straits
2.7
2.7
2.8
2.9
N/A
Danish Straits
3.2
2.8
3.0
3.0
N/A
Strait of Hormuz
16.7
17.5
15.7
15.9
17.0
Panama Canal
0.7
0.7
0.8
0.7
0.8
Crude Oil
0.1
0.2
0.2
0.1
0.1
Petroleum Products
0.6
0.6
0.6
0.6
0.6
Suez Canal and SUMED Pipeline
4.7
4.6
3.0
3.1
3.8
Suez Crude Oil
1.3
1.2
0.6
0.7
0.8
Suez Petroleum Products
1.1
1.3
1.3
1.3
1.4
SUMED Crude Oil
2.4
2.1
1.2
1.1
1.7
Notes: · All estimates are in million barrels per day. · "N/A" is not available. · The table does not include a breakout of crude oil and petroleum products for most chokepoints because only the Panama Canal and Suez Canal have official data to confirm breakout numbers. · Adding crude oil and petroleum products may be different than the total because of rounding. · Data for Panama Canal is by fiscal years.
Source: EIA estimates based on APEX Tanker Data (Lloyd's Maritime Intelligence Unit). Panama Canal Authority and Suez Canal Authority, converted with EIA conversion factors.


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