Gneiss Energy Report Highlights Potential Negative Effects of UK Gas Policy on Environment and Supply

Gneiss Energy, a UK-based strategic and corporate finance advisory firm specializing in the energy and natural resources sectors, recently released a report shedding light on the adverse impacts of the UK’s gas policy on local gas production and its repercussions on the environment and energy supply.

Dependence on LNG Imports and Norwegian Gas

The report emphasizes that gas will continue to be a crucial component of the UK’s energy mix well into the 2030s, even with the implementation of the Labour Government’s ‘2030 Clean Power Action Plan.’ However, the plan to increase the energy profits levy on oil and gas production to 78% could deter energy investments, leading to a greater reliance on imported gas sources.

Gneiss Energy highlights that the UK may have to depend more on LNG imports and Norwegian gas to meet its energy needs. While Norwegian gas offers a favorable emissions profile, the surge in demand following geopolitical events like Russia’s invasion of Ukraine has strained Norwegian production capacity, necessitating the exploration of alternative supply options.

Imported LNG, though a viable option, poses challenges due to its higher emissions intensity compared to pipeline gas. The report notes that LNG imports result in four times the embodied CO2 emissions as gas from the UK continental shelf (UKCS). Additionally, constructing LNG terminals in the UK entails substantial costs ranging from $500 million to $2 billion per terminal.

Home-Based Production

Gneiss Energy argues that a significant reduction in emissions could be achieved if the UK sourced 100% of its gas from domestic reserves. While this scenario may not be entirely feasible, the firm advocates for increased UK production, citing the emissions advantages of undeveloped UK gas fields over imported sources.

The report raises concerns about the future of key undeveloped oil and gas fields in the UK, such as Shell’s Jackdaw and Equinor’s Rosebank, following a court ruling mandating the consideration of emissions from burning fossil fuels in project approvals.

Managing Director at Gneiss Energy, Jon Fitzpatrick, underscores the importance of supporting UK domestic gas production to reduce emissions and enhance energy security. He notes the competitive emissions profile of UK gas assets and the potential economic benefits of revitalizing the North Sea oil and gas sector through strategic policy measures.

While the report acknowledges the role of Norwegian gas in meeting UK demand, it emphasizes the need for a balanced approach that includes increased UK production to mitigate emissions and ensure energy resilience.

In conclusion, Gneiss Energy advocates for a strategic focus on supporting domestic gas production to address the UK’s energy needs sustainably and reduce reliance on emissions-intensive imported sources.