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January 06, 2006

Trouble In Britain Peak Oil

Since the 80s, the UK has been the beneficiary of its North Sea oil and gas holdings, but North Sea fields are now in steep decline — North Sea oil declined 10% in 2004 alone — and the Brits are having a rough winter. So rough, in fact, that you have to wonder why so little attention is being paid on this side of the Atlantic. Guardian:

The Major Energy Users' Council (MEUC) urged utilities such as British Gas to hold back plans to further increase bills and instead work cooperatively with "shell-shocked" customers.

Andrew Bainbridge, director general of the MEUC, said: "We need a moratorium because our members are already shell-shocked by a series of price rises and there is no way they are going to be able to claw back the extra costs.

"Further price increases will force companies out of business and suppliers must work in partnership with their customers through this difficult period."

More than 100 NHS hospitals are on interruptible gas contracts, which mean supplies can be switched off with only four hours' notice. [...]

As independent suppliers warned that they were themselves low on capacity, the Department of Health refused to give details of how long hospitals could survive without further deliveries of oil.

The Association of United Kingdom Oil Independents has told the government that its members had never experienced such protracted and widespread problems. The Russian gas stand-off with Ukraine and other factors leading to soaring prices have encouraged power stations and other gas users to switch to oil.

Meanwhile, the Buncefield oil depot fire, the run on oil and other fuels due to cold weather, and a faster than expected rundown of North Sea supplies have caused chaos across the energy sector. [...]

The price of gas has fallen in recent days on the back of a resolution of the row between Russia and Ukraine, plus warmer weather. But only last week British Gas's parent company, Centrica, warned that surging wholesale prices would force all suppliers to raise their bills during 2006 following double-digit increases last year. [...]

Industrial users have started to close facilities for extended winter breaks to save money.

Statistics released by the Department of Trade and Industry yesterday underlined the fast rundown of local energy supplies, with imports of gas up by 80% in the third quarter, compared with the same period in 2004. [Emphasis added]

Modern technology means that oil and gas can be extracted more quickly and efficiently, so depletion, when it comes, is precipitous. The British experience is a preview of our own future.

Conservatives credit Margaret Thatcher with rejuvenating the British economy during the 80s. Never considered, though, is the fact that the 80s are when North Sea oil production came online, creating an enormous windfall for the UK. Now that the North Sea is past peak and declining rapidly, the UK has tough times ahead.

Posted by Jonathan at January 6, 2006 08:51 PM  del.icio.us digg NewsVine Reddit YahooMyWeb