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Natural gas

UK Business Secretary Considers Relaxing Gas Quality Regulations Amid Looming Energy Crisis

Strategic Insights

— 2 min read

As concerns about an impending energy crisis in the UK intensify, Business Secretary Kwasi Kwarteng is exploring measures to increase gas production by relaxing regulations on gas quality. The move is aimed at making use of fuel available in the North Sea that would otherwise be unrecovered, despite previously rejecting similar proposals due to concerns about the Government's green agenda. The decision comes as the International Energy Agency warns European countries to prepare for a complete cut-off in Russian gas this winter, and worst-case scenarios suggest up to six million homes could face power cuts if that happens.

Key Takeaways:

  • The UK Business Secretary, Kwasi Kwarteng, is considering relaxing gas quality regulations to increase gas production from the North Sea.
  • The move is aimed at making use of fuel that would otherwise be unrecovered, despite previously rejecting similar proposals due to concerns about the Government's green agenda.
  • The International Energy Agency has warned European countries to prepare for a complete cut-off in Russian gas this winter.
  • Worst-case scenarios modelled in Whitehall suggest up to six million homes could face power cuts if Russian gas supplies to Europe are shut down.
  • Producers estimate that relaxing rules over the long term could unlock 0.5 trillion cubic feet of gas from the Southern North Sea.
  • The changes could also bolster supplies of liquified natural gas shipped in from around the world.
  • The UK gets little gas directly from Russia, but there are concerns about a significant knock-on impact if supplies to Europe are shut down.
  • The Business Secretary is prepared to act under emergency powers if a faster decision is needed.

Statistics:

  • 0.5 trillion cubic feet of gas could be unlocked from the Southern North Sea if rules are relaxed over the long term.
  • 50% of gas demand in Great Britain is currently met by the UK Continental Shelf (UKCS) supplies.
  • Up to 6 million homes could face power cuts if Russian gas supplies to Europe are shut down.
  • £5bn is the target amount of tax to be raised from the windfall tax on the oil and gas sector this year.
  • The tax rate for North Sea producers has been hiked from 40% to 65%.
  • £104m is the amount of taxes and fees paid by BP in the UK in 2021.
  • Up to £1bn is the amount that BP expects to pay in taxes in the UK this year.

Sources:

  • Kwarteng, Kwasi, and Business Department. "We are committed to bolstering our energy security and are naturally exploring how our domestic gas fields can help deliver this alongside our substantial support for renewables and nuclear energy to deliver affordable homegrown energy." (No date)
  • International Energy Agency. "Countries in Europe need to prepare for a complete cut-off in Russian gas this winter." (No date)
  • Whitehall. "Worst-case scenarios modelled in Whitehall suggest up to six million homes could face power cuts if Russian gas supplies to Europe are shut down." (No date)
  • BP. "New figures published by BP on Friday show it paid taxes in the UK in 2021 for the first time in six years, with previous years' profits offset by tax losses tied to investment or decommissioning costs." (No date)
  • Business Department. "The regulations are constraining further volume and further development of gas from the UKCS." (No date)
  • Government source. "It is not a supply emergency" and the move would "have no material effect on the price." (No date)

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