According to OGJ, the UK held an estimated 18.8 trillion cubic feet (Tcf) of proven natural gas reserves in 2006, a 10 percent decline from the previous year. Most of these reserves occur in three distinct areas: 1) associated fields in the UKCS; 2) non-associated fields in the Southern Gas Basin, located adjacent to the Dutch sector of the North Sea; and 3) non-associated fields in the Irish Sea. In order to take advantage of its domestic reserves, the UK government has encouraged the use of natural gas, including its substitution for coal and oil in industrial consumption and electricity production. As a result, natural gas consumption in the UK reached 3.4 Tcf in 2003. Further, the percentage of total energy consumption sourced from natural gas in the UK has increased from 20 percent in 1980 to 34 percent in 2003. In 2004, the UK was a net importer of natural gas for the first time since 1996.

The UK produced 3.6 Tcf of natural gas in 2003, about the same as the previous year, but a decrease from the peak of 3.8 Tcf in 2000. The country is the fourth-largest producer of natural gas in the world, behind Russia, the United States, and Canada. The largest concentration of natural gas production in the UK is the Shearwater-Elgin area of the Southern Gas Basin. The area contains five gas fields, Elgin (Total), Franklin (Total), Halley (Talisman), Scoter (Shell), and Shearwater (Shell). Most of the leading oil companies in the UK are also the leading natural gas producers, including BP, Shell, and Total. The major gas distribution companies in the UK, such as Centrica and BG Group, also have a presence in this production sector. Like the oil industry, smaller independents have been able to acquire some maturing assets from larger operators, who find it difficult to profitably operate these older, declining fields.

Private companies control the UK natural gas sector, including production, distribution, and transmission. The largest gas distributor in the UK is now Centrica, a spin-off of the distribution assets of formally state-owned British Gas. National Grid Transeco (NGT), formed in 2002 through the merger of Lattice and former parastatal National Grid, controls the domestic gas transmission system.

There are four main pipeline systems in the UK that carry natural gas from offshore platforms to coastal landing terminals. First, the Shearwater-Elgin Line (SEAL), operated by Total, transports gas from the Shearwater-Elgin area to the landing terminal at Bacton, England. Second, ExxonMobil operates the 200-mile, 30-inch Scottish Area Gas Evacuation (SAGE), which transports associated natural gas from UKGS fields to the landing terminal at St. Fergus, Scotland. Third, the 250-mile, 36-inch Central Area Transmission System (CATS), operated by BP, links fields in the Graben area of the UKCS to Teeside. Finally, Shell operates the Far North Liquids and Gas System (FLAGS) linking associated gas deposits in the Brent oil system with St. Fergus. Once brought onshore, the responsibility for transporting natural gas throughout the country belongs to NGT. The company operates over 4,200 miles of transmission lines in the UK.

A consortium of companies, led by BG, Ruhrgas, and Distrigas, operates the Interconnector pipeline between Bacton, England and Zeebrugge, Belgium. The Interconnector, inaugurated in 1998, is capable of bi-direction operation, meaning either it can export natural gas from the UK to continental Europe (“Forward Mode”), or it can import natural gas into the UK (“Reverse Mode”). For most of its career, the Interconnector operated in Forward Mode, with a capacity of 1.9 Bcf/d. However, since mid-2005, the system has operated mostly in Reverse Mode, with a recent expansion increasing this capacity to 1.6 Bcf/d. The operators of the Interconnector plan to expand the system’s Reverse Mode capacity to 2.3 Bcf/d by the end of 2006.

The UK also imports natural gas through the Frigg pipeline system, operated by Total. Frigg connects the St. Fergus gas terminal with the Frigg gas field in the Norwegian sector of the North Sea. Finally, the UK-Eire Interconnector connects the UK with the Republic of Ireland, running from Moffat, Scotland to Dublin.

In 2003, the UK and Norway finalized the necessary political conditions for construction of the Langeled pipeline system linking Norway's Ormen Lange natural gas field to Easington, England. The 750-mile Langeled would be the longest sub sea pipeline in the world, with an initial capacity of 1.9 Bcf/d and planned maximum capacity of 2.9 Bcf/d. Construction on the project has begun, with completion expected by 2007. Gasunie plans to build a 146-mile gas pipeline linking Balgzand, the Netherlands to Bacton, England. Initial construction on the Balgzand-Bacton Line (BBL) began in October 2004, with completion of the project expected by the end of 2006. According to Gasunie, the BBL will have an initial capacity of 1.1 Bcf/d, with a maximum capacity of 1.7 Bcf/d.

Currently, the UK has a single LNG import terminal, the NGT’s Grain LNG on the Isle of Grain. The facility has a sendout capacity of 420 Bcf/d, which NGT plans to expand to 1.3 Bcf/d by the end of 2007. Algeria’s Sonatrach and BP are the principle importers using the terminal.

ExxonMobil and Qatar Petroleum have received regulatory approval for the South Hook LNG receiving terminal in Milton Haven, Wales. The terminal will receive its LNG from the Qatargas II liquefaction project in Ras Laffin, Qatar, which is also a joint project between the two companies. The South Hook LNG project should come online by 2007, with an initial capacity of 1.0 Bcf/d and a maximum capacity of 2.1 Bcf/d by 2009.

Finally, BG has collaborated with Netherlands-based Petroplus and Malaysia-based Petronas to also build an LNG receiving terminal in Milton Haven, on the site of an existing natural gas storage facility owned by Petroplus. Dragon received regulatory approval from Ofgem in early 2005, and the project should start receiving cargos by the end of 2008 at an initial sendout capacity of 580 Mmcf/d.