With UK gas prices at record highs, the ability of the country's gas sector to help meet demand has never been in sharper focus.
The UK still produces a lot of its own gas, though total output in 2020 of 438 TWh (41 Bcm) was well down on its 2000 peak of almost 120 Bcm, government data showed.
But with the surge in wholesale gas prices -- which has been replicated across Europe and Asia -- the UK's exposure to market dynamics that are out of its control mean its domestic industry is more important than ever.
UK prices have soared in recent weeks, adding to a sustained price rally since the start of 2021, with the day-ahead price on the UK NBP hub assessed by S&P Global Platts on Sept. 17 at 165 pence/therm (Eur66/MWh, $22.69/MMBtu).
That compared with a day-ahead assessment of 29.1 p/th a year earlier, representing a 467% increase year on year.
The UK market is unique in a number of ways, with access to global LNG markets via three import terminals and pipeline connections to Norway and elsewhere in Europe.
But it has only limited short-range storage after the decision in 2017 to stop using the large Rough site as a storage facility and instead to produce the cushion gas from the site. That sets it apart from most other European countries, which have fairly significant storage capacity.
The UK, therefore, relies mostly on imports to top up domestic gas production, with Norway its main external supplier along with LNG from international producers including Nigeria, Qatar and the US.
That makes it susceptible to price increases and puts it in competition with other gas buyers.
"Norwegian supply is only reliable for as long as the UK is willing to pay more than everyone else for it," James Huckstepp at S&P Global Platts Analytics said.
When gas demand rises, the UK cannot call on additional domestic supply, which is usually maximized, making it dependent on additional imports.
For example, the UK has seen a year-on-year drop in LNG imports of some 4 Bcm in 2021 so far, as a higher JKM spot LNG price drew cargoes to Asia.
The UK also exports to Ireland and traditionally to elsewhere in Europe at certain times of the year, which means domestic supply makes up less of the total deliveries on a net basis.
UK gas production of 438 TWh in 2020 was outweighed by imports of 478 TWh, according to government data. Exports totaled 106 TWh, leaving 808 TWh to be consumed in the UK.
Ageing infrastructure in the North Sea, meanwhile, also means production outages are fairly common.
According to Platts Analytics data, UK commercial gas production in 2021 to Sept. 10 was 20.2 Bcm -- down 5.7 Bcm from the 25.9 Bcm produced in the same period of 2020.
"UKCS production has largely trailed below historical levels since the beginning of this year," Ying-chin Chou at Platts Analytics said. "This was partly because of the maintenance delays from 2020 due to the COVID situation."
Some of the supply issues were also likely to be the result of the low gas prices in recent years and corresponding decline in investments, Chou said.
Despite the year-on-year declines, Platts Analytics expects UK gas production to recover given that major summer maintenance work has been completed.
"We expect production to continue improving as we move out of the maintenance season, while several new fields (Tolmount, Elgood and Finlaggan), are expected to start production this winter," Chou said.
The startup of Tolmount in particular, operated by Harbour Energy, has been pushed back a number of times.
The UK upstream industry believes the recent price strength is a reminder of the importance of domestic gas.
"Soaring domestic energy bills, sudden industrial shutdowns, and warnings of food shortages -- all happening this weekend -- reinforce the need to maintain the UK's North Sea gas supplies," industry group OGUK said Sept. 18.
The high gas prices have seen US-based CF Industries idle two of its fertilizer production plants in the UK, which has had the knock-on effect of causing a shortage of CO2, a by-product of fertilizer production that is used in various food processes.
OGUK Energy Policy Manager Will Webster said the gas price increase "shows how we continue to need UK gas".
"Letting production fall faster than we can reduce demand risks leaving us increasingly dependent on other countries, and at the mercy of global events over which we have no control," Webster said.
OGUK also said the crisis coincided with discussions on whether to open new gas fields in the North Sea to replace those running out or becoming economically unviable to produce.
The UK has opted to pause new exploration licensing activity this year to ensure compatibility with environmental criteria.
OGUK predicted that UK North Sea output will roughly halve by 2027 unless new fields are opened. "If that happens the UK will be even more reliant on imports than now," it said.
One of the main reasons for the surge in European gas prices has been lower-than-expected flows from Russia.
The UK has less exposure than many countries in Europe to Russian gas, though it is difficult to estimate exactly how much Russian gas ends up in the UK and how much gas is sold by Gazprom and its affiliates in the UK.
Estimates have varied from less than 1% of total UK demand (the UK government) and 20% (Gazprom), though actual physical flows of Russian gas via Europe (the IUK and BBL pipelines) to the UK are limited.