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Energy Bill

I hope I am not quoting too copiously; I have referred only to two tables, and that is all I am going to do. The report shows the huge importance of storage, of which the Government have never made any secret. They want more storage. The question—here I might satisfy the noble Lord—is what the obstacles are to getting more storage. I have already referred to the planning system, and I will not say any more about that. There is the question of the appropriate size of storage. As I said, most onshore storage is only for short and medium-term duration, for the most part in salt caverns. There is in total about 1 billion cubic metres of gas storage capacity—which amounts to only about one-third of the storage at the Rough gas field—installed and operating at present. It is just about sufficient to meet the peak demand which we have at the moment, and it is very necessary that it should be there. Everyone including Ministers—no doubt the Minister will confirm this in his reply—agrees that there is a great need to encourage more offshore long-duration gas storage. There is a range of offshore storage locations, which are mostly available in the southern North Sea and the Irish Sea. On the economic issue, it is a paradox that when gas prices are low, no one needs storage, but when gas prices are high, no one can afford to build new storage capacity. The big cost in this is the need to pay for the ““cushion gas””; that is, the need to have a certain amount of gas in your storage before you can put any substantial new supplies in, otherwise the system does not work and does not function effectively as a gas storage reservoir. I am told that typical costs would run to between £0.5 billion and £1 billion in the current environment just for the storage of gas on a large offshore facility. Evidence of that has come to light quite recently. Only yesterday, the Tullow company announced the sale of the Hewett gas field and the onshore gas plant to Eni for £210 million cash. That is a measure of the value of an offshore gas field and of what Eni is prepared to pay for it. It is early days yet but it is thought that Eni might use it to build a new offshore gas storage facility. It is interesting that most of the competitors cannot see that it could be economic and that it could be justified to put the investment in. The announcement is that Eni has bought the gas field and therefore has the reservoir, but it will need to spend a great deal more to turn it into a working offshore gas storage reservoir. My point about the amendment, and in response to the noble Lord, Lord O'Neill, is that this is what the report has to address. It must not be just the tables of figures that we get from the National Grid and to which I referred a few minutes ago—it may seem like years but it is only minutes. We would expect the report that my noble friend's amendment calls for to highlight, deal with and discuss the problems and to indicate what the solutions to those problems might be. The Government will now be able to say, ““Look, Eni has paid over £200 million to buy the Hewett gas field and the appropriate onshore facilities, so that shows that the market is working””. This morning, the general view of people in the industry with whom I have been discussing this announcement, which was made only yesterday, is that they do not see how it can be economic. There are real problems if one is to get new large storage facilities offshore which are comparable to the Rough gas field. That is the only big gas field and the question is whether there will be more. At the present price of gas, the cost of providing the cushion to turn it into a working reservoir is very steep, to the point where some commentators say that it cannot be economic. I hope the Minister may be able to give us some answers on that today, but my main point is that this is the kind of thing that the report that my noble friend's amendment is calling for has to deal with. Without that information, it just becomes another table of figures, as the noble Lord, Lord O'Neill, rightly said. That is not what we are looking for. We are looking for a serious discussion of the problems of getting more gas storage, which is in accordance with the Government's wishes. I warmly support my noble friend's amendment.