PN240604B

EMBARGOED UNTIL 00.01

THURSDAY 24 JUNE 2004

ATTENTION:NEWS EDITORS/EDITORS/ENERGY/BUSINESS/ POLITICAL/CONSUMER/EUROPEAN CORRESPONDENTS

LORDS REPORT URGES GOVERNMENT TO EXAMINE THE GAS MARKET'S ABILITY TO COPE WITH EXTREME CONDITIONS

A new Lords report − Gas: Liberalised Markets and Security of Supply − will be published at 00.01 Thursday 24 June.

The Chairman of the Committee, Lord Woolmer of Leeds, said:

"The Committee questions the UK gas market's ability to cover severe peak demand over the next two to three winters."

"While the Minister for Energy, Stephen Timms MP, tried to reassure the Committee, we remain unconvinced. Ofgem believe supplies are adequate except in extreme conditions. It is the extreme conditions we worry about."

"Transco has the physical capacity to transport a high-surge demand for gas, but the pipelines bringing gas into the UK have little spare capacity."

"New capacity to import is being built but even when new import schemes start operating in 2007, we still question whether a market-based, 'just-in-time' system will provide insurance against the one-in-twenty year peak demand that Transco is legally obliged to meet, or against unforeseen circumstances."

The report urges the Government to look carefully at the UK's ability to cope with peak demands, particularly over the next few winters.

It recommends new procedures for speeding up the process of re-connecting customers after an unlikely, though possibly wide-spread disruption to the supply of gas.

The report also concluded that:

  • The EU measures to liberalise European gas markets would enhance the security of gas supply

  • Gas prices would rise as global demand increased

  • More LNG would be imported into the EU and the UK

  • Globally, there are ample supplies of gas, from diverse sources which would be available to the EU (including the UK) up to 2025 and probably beyond

  • Substantial levels of investment would be required to provide additional pipelines to bring gas from its sources to the EU and UK markets.

NOTES FOR EDITORS

1. The inquiry was conducted by Sub-Committee B (Internal Market) of the European Union Committee. The members of the Sub-Committee are:

Baroness Cohen of Pimlico

Baroness Eccles of Moulton

Lord Fearn

Lord Geddes

Lord Haskel

Lord St. John of Bletso

Lord Shutt of Greetland

Lord Swinfen

Lord Walpole

Lord Woolmer of Leeds (Chairman)

2. The report is published by the Stationery Office: Gas:Liberalised Markets and Security of Supply, House of Lords Select Committee on the European union, 17th Report, Session 2003−04, HL Paper 105, ISBN 010 400465 7, price £20.00. The full text of the report will be available on the internet via www.parliament.uk shortly after publication.

3. The EU is already a major net importer of gas. By 2010 it is expected to be nearly 60 per cent dependent on imported gas; this dependency will increase to between 70 and 80 per cent by 2020.

The UK is rapidly moving from the position of net exporter of gas to net importer. By 2010 the UK will be importing around 50 per cent of its gas. This is likely to rise to around 70 per cent in 2020.

4. Gas is not only used for domestic and commercial heating and cooking. It is also used to produce around 38 per cent of the UK's electricity.

5. France, Germany and Italy all have storage capacity equal to 20 per cent of annual demand or more. In the UK this ratio currently stands at 4 per cent.

For embargoed copies of the report please contact:

  • Jillian Bailey, Press and Publicity Officer (Committees) on 020 7219 8659.

For further information please contact:

  • Patrick Wogan, Clerk to the Sub-Committee on 020 7219 5864.

[ENDS]