This document summarizes a research project on global gas security and governance led by Professor Mike Bradshaw of Warwick Business School. The project uses a supply chain approach to analyze gas security across upstream, midstream, and downstream areas. It also examines implications for the UK, which has become increasingly reliant on gas imports in recent decades. Key topics discussed include the UK's growing import dependence, the globalization of its gas security, and applying the supply chain framework to better understand challenges to UK gas security.

1. Warwick
Business
School
Professor
Mike
Bradshaw

2. Warwick
Business
School
The
Geopoli*cal
Economy
of
Global
Gas
Security
and
Governance:
Implica*ons
for
the
UK
1) A
two-­‐year
research
project
funded
by
the
UKERC,
end
date
31st
December
2013
(extended
to
end
of
March
2014).
2) Involves
a
team
of
researchers:
ž Mike
Bradshaw,
Warwick
Business
School
ž Gavin
Bridge,
Durham
University
ž Stefan
Bouzarvoski,
University
of
Manchester
Project
research
assistant:
Joseph
DuUon
Consultants:
Jim
Watson
UKERC/Sussex
and
the
Gas
Programme
at
the
Oxford
InsXtute
for
Energy
Studies

3. Warwick
Business
School
Why
a
Supply
Chain
Approach
to
Gas
Security?
ž Provides
a
necessary
anXdote
to
the
current
failings
of
the
literature
on
the
geopoliXcs
of
energy
security
vis-­‐
à-­‐vis
natural
gas.
ž Provides
a
framework
for
analysis
of
the
different
dimensions
of
gas
security.
ž Provides
a
framework
for
idenXfying
the
actors,
relaXonships
and
networks
that
influence
global
gas
security.
ž Provides
a
basis
for
examining
the
interacXons
between
global
trends
and
regional
(EU)
and
naXonal
(UK)
energy
policies.

4. Warwick
Business
School
Exploration
Production
Processing
Storage
Transport-
ation
Storage
Distribution
End-use
Natural gas reserve base
(Conventional/Unconventional)
Oil reserve base
w/associated gas
Oil
Gas
Pipeline – Transportation-LNG-ship
Storage - LNG
Local pipe-grid-Distribution-LNG regasification/distribution
To pipeline
specification
To LNG
To oil
chain
Ethane,
propane,
butane
Residential &
Commercial
Electricity
generation
Industrial
end-use
Transportation;
natural gas,
LNG
Upstream
Midstream
Downstream
The Natural Gas Supply Chain
Source:
based
on
IGU
(2010)
Natural
Gas
Unlocking
the
Low
Carbon
Future.
Oslo:
IGU,
p.
12.

5. Warwick
Business
School
A
Supply
Chain
Approach
to
Gas
Security
Geopoli*cs Dimensions Issues
UPSTREAM
Security
of
Supply
• Resource
Base
• Investment
• Technology
• Nature
of
proven
reserves
• Access
to
reserves
for
investors
• Access
to
investment
to
develop
proven
reserves
• Availability
with
exisXng
technology
and
prevailing
price
• Technical
reliability
of
producXon
MIDSTREAM
Security
of
Transport
(Transit)
• Processing
• TransportaXon
• Storage
• Processing
of
associated
gases
• Pipeline
network
• Compressor
staXons
• LiquefacXon
faciliXes
• LNG
Shipping
• RegasificaXon
faciliXes
• Interconnectors
DOWNSTREAM
Security
of
Demand
• Power
• Industrial
use
• DomesXc
use
• Transport
• Role
of
gas
in
the
energy
mix
• Price
formaXon
• Price
compeXXveness
• Contract
structure
• Energy
policy
• Carbon
tax
• Carbon
Capture
&
Storage

6. Warwick
Business
School
The Case of the UK
ž Growing Import dependence
ž The Globalization of UK gas security
ž Growing uncertainty
ž A Supply Chain Approach to UK Gas
Security

7. Warwick
Business
School
Natural
Gas
Flowchart
2012
(TWh)
Source: DECC (2013) DUKES
Chart H.3: Natural gas flow chart 2012 (TWh)
Note:
This flow chart is based on the data that appear in Table 4.1, excluding colliery methane.
148

8. Warwick
Business
School
0.0
20.0
40.0
60.0
80.0
100.0
120.0
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
2012
UK
Natural
Gas
Produc*on
and
Consump*on:
1970-­‐2012
(BCM)
ProducXon
ConsumpXon
Peak
in
2000
Net
importer
from
2004
In
2012
Imports
accounted
for
47%
of
supply
Source:
BP
2013

9. Warwick
Business
School
THE UK’S CONTEMPORARY GAS BALANCE
VECTORS
1. UK Continental Shelf
2. Norwegian Continental
Shelf
3. Interconnectors (IUK &
BBL)
4. Liquefied Natural Gas
5. Exports to Ireland
6. Domestic gas storage
7. Domestic
unconventional gas?
GAS
107
Map 4.2: The National Gas Transmission System 2010
Source: International Energy Agency and DECC
Clair
?
*
*
*

10. Warwick
Business
School
Source:
DECC
(2013)
Natural gas
UK trade in natural gas, 1980 to 2012
TWh
LNG Imports
Exports
Pipeline Imports
Net Imports
-200
-100
0
100
200
300
400
500
600
2012200520001995199019851980
TWh
1980 1990 2000 2010 2011 2012
Natural gas production 404.8 528.8 1,260.2 664.4 526.0 452.1
Imports 116.3 79.8 26.0 589.5 584.4 547.3
of which

11. Warwick
Business
School
Re-orientation of domestic gas flows
Source:
NaXonal
Grid
2013
minimum;
Figure 2.5A

12. Warwick
Business
School
UK LNG Imports
LNG
Facility
Ownership
Capacity
2012
%
Dragon
LNG
(Milford
Haven)
BG
Group:
50%
Petronas:
50%
6bcm
1.2%
South
Hook
(Milford
Haven)
Qatar
Petroleum
Intl.:
67.5%
ExxonMobil:
24.15%
Total:
8.35%
21bcm
73.4%
Isle
of
Grain
(Essex)
NaXonal
Grid
(Sonatrach,
GDF-­‐Suez,
Centrica,
E.ON
Ruhrgas,
and
Iberdrola)
20.3bcm
25.4%
Others
Algeria,
Egypt,
Nigeria,
Norway,
LNG
=
46.8%
Of
UK
Gas
Imports
in
2011
and
27.6%
UK
Gas
Imports
in
2012
0
500
1000
1500
2000
2500
3000
2005
2005
2005
2006
2006
2006
2007
2007
2007
2008
2008
2008
2009
2009
2009
2010
2010
2010
2011
2011
2011
2012
2012
2012
2013
Million
cubic
metres
Qatar
98%
Others
2%

13. Warwick
Business
School
Na*onal
Grid’s
Annual
Gas
Demand
Scenarios
2013
025
Our Slow Progression scenario has a fairly flat view
of annual demand over the scenario period. There
is a further decrease in demand from 2012 due to a
slower economy. Total demand then remains broadly
flat, until the mid 2020s when total demand starts
to decrease predominantly due to the changes in
power generation demand.
Figure 2.2A
Annual Gas Demand Scenarios including history – Slow Progression
Source: National Grid
Figure 2.2B
Annual Gas Demand Scenarios including history – Gone Green
Source: National Grid
In the Gone Green scenario, there is a continual
reduction in annual gas demand throughout the scenario
period. This is due to a combined influence of further
efficiency savings, a transition to alternative sources
of energy in our Gone Green scenario, and power
generation being maintained as marginal plant for
electricity balancing and reserve.
Gas Ten Year Statement
November 2013
026
13
Our Slow Progression scenario has a fairly flat view
of annual demand over the scenario period. There
is a further decrease in demand from 2012 due to a
slower economy. Total demand then remains broadly
flat, until the mid 2020s when total demand starts
to decrease predominantly due to the changes in
power generation demand.
In the Gone Green scenario, there is a continual
reduction in annual gas demand throughout the scenario
period. This is due to a combined influence of further
efficiency savings, a transition to alternative sources
of energy in our Gone Green scenario, and power
generation being maintained as marginal plant for
electricity balancing and reserve.

14. 14
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
110%
120%
-20
0
20
40
60
80
100
120
00/01
02/03
04/05
06/07
08/09
10/11
12/13
14/15
16/17
18/19
20/21
22/23
24/25
26/27
28/29
30/31
32/33
34/35
bcm/y
History Future
Exports
Import Generic
Continent
LNG
Norway
Onshore
UKCS
Import Dependency
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
110%
120%
-20
0
20
40
60
80
100
120
00/01
02/03
04/05
06/07
08/09
10/11
12/13
14/15
16/17
18/19
20/21
22/23
24/25
26/27
28/29
30/31
32/33
34/35
bcm/y
History Future
Exports
Import Generic
Continent
LNG
Norway
Onshore
UKCS
Import Dependency
Annual Gas Supply ‘Gone Green’
Annual Gas Supply ‘Slow Progression’
Source: National Grid 2013

15. Warwick
Business
School
A Supply Chain Approach to UK Gas Security
Geopoli*cs Dimensions Issues
UPSTREAM
Security
of
Supply
• Resource
Base
• Technology
• Investment
• ProducXon
from
UKCS
• ProducXon
from
Norwegian
CS
• ProducXon
from
Russia/N.
Africa
• Upstream
of
LNG
supply
chain
&
access
to
LNG
cargoes
• DomesXc
unconvenXonal
gas
producXon
(biogas
&
shale)
MIDSTREAM
Security
of
Transport
(Transit)
• Processing
• TransportaXon
• Storage
• LNG
RegasificaXon
faciliXes
• InterconnecXon
(domesXc
and
external)
• Processing
&
storage
• Re-­‐orientaXon
of
the
NTS
• Role
of
NBP
as
a
liquid
market/hub
DOWNSTREAM
Security
of
Demand
• Power
generaXon
• Industrial
use
• DomesXc
use
• Role
of
gas
in
UK
energy
strategy
• Price
CompeXXveness
• Contract
Structures
• Gas-­‐to-­‐Gas
market/hub
evoluXon
• Gas
intermiUency
• Carbon
floor
price
and
ETS
• Carbon
Capture
&
Storage

16. Warwick
Business
School
Globalizing UK Gas Security of Supply
• Globalization of LNG post Fukushima
• Geopolitics of Eurasian Gas Supply
• The Future of Norwegian Gas Production
• The Consequences of the US Shale Gas Revolution
• Prospects for Shale Gas in the UK and Europe

17. Warwick
Business
School
Conclusions
ž There
is
a
tendency
to
focus
on
the
issue
of
physical
security
of
supply—the
UK
has
a
diverse
gas
supply
system—but
it
is
increasingly
exposed
to
risks
in
global
gas
markets
and
price
security
of
supply
is
the
more
likely
concern.
ž Most
supply
disrupXons
have
been
technical
failures
in
the
upstream
and
midstream,
but
miXgaXon
measures—
interconnecXon
and
storage—can
reduce
these
risks,
but
who
pays?
ž The
greatest
source
of
insecurity
and
uncertainty
relates
to
‘security
of
demand’
and
this
is
impacXng
on
investment
in
the
power
generaXon
sector.
ž How
much
gas,
for
how
long
requires
an
whole
systems
approach.

18. Warwick
Business
School
Michael.Bradshaw@wbs.ac.uk
18