Gas is answer to UK's rising power needs - Shell chief

AN OIL industry leader last night claimed that gas-fired generators would be the cheapest and quickest way of plugging the gap in electricity supply as the UK closes nearly half its current power stations in the next ten to 15 years.

Addressing the Scottish Oil Club dinner in Edinburgh last night, Simon Henry, chief financial officer at Shell, said the recent boom in new forms of gas production in America such as shale gas extraction had freed up supplies from the Middle East and Russia.

Domestic sources could still supply about 40 per cent of UK demand in 2020, with a pipeline from Norway providing a further third.

"For the UK to benefit from the reliability and cost-effectiveness of natural gas, we must nail the myth that it will weaken the country's energy security," he said.

"Expanding natural gas at the expense of coal is the fastest and most effective way to reduce CO2 emissions in the power sector over the next decade. Modern gas plants emit between 50 per cent and 70 per cent less CO2 than coal plants, so the UK has every reason to back natural gas as a secure and sustainable energy supply, and every reason to make the most of its domestic resources," he said.

He added that carbon capture and storage (CCS) technology could cut emissions on gas-fired plants by 90 per cent if deployed, and that it would cost "tens of billions of pounds" less than using offshore wind power to meet the same targets.

Describing the North Sea as "a trillion-pound opportunity", Henry said oil and gas exploration there could drive huge employment growth in the UK and especially Scotland, thanks to rising demand and declining production in developed fields.

He also suggested the North Sea, and the wealth of expertise in offshore and subsea engineering centred on it, provided an ideal opportunity to store carbon from power stations once CCS was rolled out.

He said: "We have the technical skills, thanks to decades of experience in process engineering. And we also have plentiful CO2 storage sites in the form of depleted oil and gas fields and saline aquifers. In fact, between them, the UK, Norway and the Netherlands could cover around 40 per cent of the EU's storage needs.

"But to turn potential into reality, industry and government must work together to deliver a series of successful demonstration projects at an industrial scale."

l Shares in Rockhopper Exploration, one of several companies hunting for oil in the Falkland Islands, fell by 17 per cent yesterday as the market reacted poorly to its latest drilling update. Although the company said the result of the second well to target the Sea Lion site in the North Falkland basin was "technically encouraging" it said further work was needed to interprete the results.

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