Why is LNG needed in the UK?

• LNG is used to heat our homes, cook food, enjoy a hot shower and even light our streets.

• Over 18 million homes in the UK use natural gas.

• 40% of all power produced in the UK comes from natural gas.

• The demand from consumers and businesses in the UK for more energy from natural gas is increasing.

• The UK’s traditional source of natural gas, the North Sea, is declining.

• There is a need to secure access to additional sources of natural gas to meet consumer and commercial demands in the UK.

• LNG is used to meet such a demand when the distances required for transportation of natural gas from one country to another are greater than those appropriately provided for by a pipeline (for example gas from Norway would come by pipeline and that from West Africa via LNG ship).

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The need for LNG in the UK

LNG has been used for more than sixty years in countries such as the USA, Korea and Japan, and improved technology is now making it more economical to produce, transport and store, opening up a wider market for its use.

LNG is becoming an alternative to oil or piped gas (natural gas transported from its country of origin through pipelines). LNG is increasingly being seen as the best technology for large-scale movement of natural gas over long distances.

Another reason why global demand for LNG imports is growing is the increasing need for countries, such as the UK, to diversify energy supplies to ensure security of supply.

No form of energy and no source of supply can offer absolute security. Improving security of supply therefore means reducing the likelihood of sudden shortages and having contingency arrangements in place to limit the impact of any which do occur.

Diversity and security are closely linked to each other. Diversity can increase the security of supply by reducing the impact of disruption from any one source.

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Increasing demand for natural gas

According to industry forecasts there will be a 16% increase in UK annual gas demand by 2011/12, with peak demand growing by 20% over the same timeframe. With domestic gas production in decline, the UK will become a net importer of gas during 2005/6.

The industry’s forecasts, supported by those of the UK Government, show the UK’s dependency on imported gas will rise to nearly 50% by 2011/12. In order to access the still plentiful supplies of gas that exist elsewhere in the world a substantial amount of new infrastructure is required.

The industry has recommended that up to three more interconnections (fixed pipelines) with the Continent or the equivalent in LNG importation facilities will be needed in the next ten years to fill this gap.

Many stakeholders in the industry believe that importing gas to the West Coast of the UK and the associated pipeline extension is the best solution to further ensure diversity and security of supply. In fact, the Government's Performance and Innovation Unit (PIU) 2002 publication, ‘The Energy Review’, identified the need for the private sector to develop LNG terminals to provide greater diversity of fuel sources.

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Securing energy for Wales

A more local consideration was the enhancement of the gas transmission infrastructure in the area, which was recognised as being of limited capacity, hence a barrier to the potential economic development of West Wales. Furthermore, there was and remains a demand for fuel gas within the existing petroleum refining industry in Milford Haven; meeting this need will help to safeguard jobs and investment.

Permission has also been granted for the development of similar facilities at South Hook to the west of Milford Haven town.

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