Energy and Utility Management Consultants

Elgin Platform Gas Leak, Japanese Nuclear Update & Touted Changes to CRC Scheme

March 2012


Although carrying no immediate threat to the environment as the gas typically disperses naturally to the atmosphere within hours, the impact of the Elgin platform gas leak - with the current estimated loss of gas predicted to be 180 barrels of oil equivalent - is not expected to have any significant detrimental effect on supply. Worth noting is the fact that the well which is leaking was no longer producing gas prior to the fault (the reasons for said fault are still unclear), but supply worries are liable to surface despite the plentiful storage across the UK as active neighbouring oil platforms are partially vacated for safety reasons. The effects of such an incident may be contrary to what one might expect - in the immediate aftermath of the Deepwater Horizon oil spill in April 2010, the wholesale price of Brent crude oil actually fell by almost $15 per barrel, and this following the loss of almost 5 million barrels of oil shows just what an unpredictable commodity Brent crude oil is. On the positive side of exploration though, BP have been given the green light by the DECC (Department of Energy and Climate Change) to begin operations at the deepwater well in North Uist near Shetland. The controversial but potentially significant discovery is expected to expand on the already-extracted 800 million barrels of oil from the region and could further reduce the UK's dependence on importing Brent crude. With regard to other energy sources, the last of Japan's 54 nuclear reactors is due to close for safety checks and general maintenance this May, which will see a notable increase in LNG deliveries to Japan between May and August (when generators are due to start coming back online) to fill the supply void. This extra competitiveness in the market is likely to impact the global cost of LNG and natural gas directly, but to what extent remains to be seen. Fortunately, this shutdown is not a permanent situation; the generators will be restarted following the thorough check-ups and reliance will be moved back towards nuclear in time. Although it's worth bearing in mind that no guarantees are given that all generators will return to the Japanese grid at all - operators are required to gain the permission of the Government and of local communities before they restart reactors; the latter being unquestionably harder to win over. In relation to renewable energy, and the Supreme Court has blocked any moves by the Government to appeal their ruling on subsidies paid through Feed-in Tariffs (FiTs). It was the coalition's intention to backdate a reduction of almost 50% in FiTs paid to 12/12/11, but the Supreme Court has upheld complaints that the consultation period was not honoured, and so all installations up to 03/03/12 will be eligible for the higher rate of FiT. Good news for early and recent adopters, but the incentive for future installations doesn't exactly have people falling over themselves to generate new energy this way. Staying with government decisions, and Energy Secretary Edward Davey has announced plans to overhaul CRC legislation which could reduce costs and, just as importantly, simplify the scheme. The plans include : • reducing the number of fuel types included from 29 to 4, • shortening the qualification process and, • reducing the amount of reporting required, all in order to streamline the scheme More details on this will follow, but in the meantime, if you need any assistance in making sense of your business energy and any associated legal requirements; just get in touch with our expert energy management consultants and engineers for advice that could well prove invaluable.





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