Gas Gathering (North Sea) (Hansard, 19 June 1980)

§ Mr. David Howell

At today's high energy prices, and with growing industrial demand for natural gas, our offshore gas reserves represent an increasingly precious national resource. The Government are determined to make the most of that asset and to eliminate uneconomic waste of gas by flaring. I particularly welcome therefore the report from the study team from the British Gas Corporation and Mobil, which is published today as energy paper No. 44. Copies have been placed in the Libraries of both Houses.

The report recommends that a new offshore gas pipeline system should be built consisting of a 36 in. diameter trunk line from the Statfjord area via quadrant 16 to St. Fergus, with a northern spur from Magnus and a larger southern spur from Fulmar. Fields along the route would be connected by lateral lines, and provision made to link in later 597W fields. The system would be designed to take a high proportion of natural gas liquids, to minimise offshore processing costs.

At a terminal at St. Fergus gas to British Gas specifications would be separated from the natural gas liquids. The report has concentrated on piping those liquids for fractionation at Nigg Bay, but also considers other possibilities. The total cost of the project is estimated at about £1.1 billion.

The Government have given careful consideration to the study team's report and the implications for the nation of the general recommendations. Applications for pipeline authorisations and planning permissions will need to be made in due course. We consider, however, that a pipeline system along the general lines recommended would be in the national interest. The integrated gas gathering concept would, through its economies of scale, both allow the development of smaller gas accumulations and facilitate the most economic collection of larger gas deposits. It should also reduce wasteful offshore flaring, and encourage further exploration within its catchment area. On land, it should help maintain supplies of gas and an integrated approach to disposal of the liquids should provide valuable opportunities for petrochemical development. Once flows have built up the pipeline would each year land gas and liquids worth some £1½ billion.

Various schemes have been proposed for the possible use of the gas liquids and these will require careful consideration. Where there are alternatives it will be necessary to evaluate the advantages and disadvantages in terms of maximising the value obtained by the nation from the natural gas liquids and of strengthening the United Kingdom's position in petrochemicals.

The Government consider it important that a gas gathering system should be constructed as quickly as possible, with the aim of bringing gas ashore from 1984–85. I have therefore invited British Gas, Mobil and BP to form, together with a financial adviser, an organising group. This will develop proposals for how a pipeline organisation could best be structured and financed as a private utility transmission company outside the 598W public sector. I envisage British Gas taking up 30 per cent. of the equity of such a company, with the remainder of the equity being offered in appropriate proportions to financial institutions, licences and customers for the NGL and, if Norwegian gas should be committed for transmission through the system, Norwegian concerns. I also envisage that the company would be financed substantially by loan finance raised from the markets, and without Government guarantee. The impact of BGC's participation in the pipeline company will be minimal in terms of public expenditure. The organising group intends to progress its work so that a pipeline company can be formed in the autumn.

The detailed design of the facilities will require active assistance from the licensees of the fields from which the gas will be transmitted. I hope that all those licensees will give every assistance to the project.