CUTS in UK gas production could put pressure on prices and slow the energy transition according to experts who have said comments by Nicola Sturgeon have created uncertainty in the sector.
“The recent call of the Scottish First Minister on the UK government to reassess licences already issued for future oil and gas developments is already creating uncertainty for greenfield projects,” said Wood Mackenzie.
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The Edinburgh-based consultancy highlighted the importance of boosting UK gas production following a slump in output. This has raised the risk the country could face supply shortages this winter.
Noting that UK gas production fell 28 per cent in the first eight months of this year Wood Mackenzie said the drop had fuelled a rally in the price fetched by the commodity on European markets.
The fall in production largely reflected disruptions related to maintenance and delays in work on new fields, such as Tolmount.
Output should recover as new projects are completed, including some that were deferred as a result of the coronavirus pandemic.
However, with demand for gas booming in areas such as Asia, Wood Mackenzie warned: “An already tight UK winter balance is premised on this supply recovery, but any disruption will put the UK system under significant strain.”
The company added: “Limiting supply without reducing demand is only going to increase the UK’s reliance on gas imports – where competition for volumes in Europe and globally will continue to increase.”
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Wood Mackenzie said investment in the domestic gas supply remains crucial to ensuring a smooth energy transition to renewables and new technologies.
Gas can be used as an alternative to coal and as a raw material for the production of hydrogen. Factors that have fuelled the market rally include the limited growth seen in Russian pipeline supplies amid geopolitical tensions.
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