According to OGJ, the UK held an estimated 10.3 trillion cubic feet (Tcf) of proven natural gas reserves in 2010, a 15 percent decline from the previous year. Most of these reserves occur in three distinct areas: 1) associated fields in the UK continental shelf (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 as a substitute for coal and oil in industrial consumption and electricity production. Natural gas consumption in the UK reached 3.1 Tcf in 2009, falling about 9 percent compared with the prior year, while the percentage of total energy consumption sourced from natural gas in the UK was 36 percent in 2007.

The UK produced 2.1 Tcf of natural gas in 2009, falling more than 16 percent compared with the previous year, which was the largest year-on-year production decrease in at least 30 years. At 2.1 Tcf, UK’s production reached the lowest level since 1993. While the country was one of the largest producers of natural gas in the world only a few years ago, it has since slipped to thirteenth place.

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, Franklin, Halley, Scoter, and Shearwater. Most of the leading oil companies in the UK are also the leading natural gas producers, including BP, Shell, and ConocoPhillips. The major gas distribution companies in the UK, such as BG Group and E.ON Ruhrgas, also have a presence in the production sector.

Private companies control the UK natural gas sector, including production, distribution, and transmission. The largest gas distributor in the UK is Centrica, a spin-off of the distribution assets of formally state-owned British Gas. The British gas distribution sector underwent a major change in 2005, when National Grid Gas sold four of the eight gas distribution networks to Scotia Gas Networks, Wales and West Utilities, and Northern Gas Networks. Prior to this sale, National Grid controlled 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. The Shearwater-Elgin Line (SEAL), operated by Shell, transports gas from the Shearwater-Elgin area to the landing terminal at Bacton, England. ExxonMobil operates the 200-mile, 30-inch Scottish Area Gas Evacuation (SAGE), which transports associated natural gas from UKCS fields to the landing terminal at St. Fergus, Scotland. The 250-mile, 36-inch Central Area Transmission System (CATS), operated by BP, links fields in the Central North Sea to Teesside. Finally, Shell operates the 283-mile 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 the utilities operating in the UK, including National Grid and Scotia Gas Networks.

A consortium of companies operates the Interconnector pipeline between Bacton, England and Zeebrugge, Belgium. The Interconnector, inaugurated in 1998, is capable of bi-directional 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”). Since it began operating, the Interconnector has mostly operated in Forward Mode, however during late fall and winter seasons, the pipeline has tended to operate in Reverse Mode. The pipeline has undergone three phases of expansion, with additional capacity and compression added to it between 2005 and 2007. Interconnector is currently capable of transporting 2.0 Bcf/d in Forward Mode and 2.6 Bcf/d in Reverse Mode.

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.

Currently, the UK has four LNG import terminals and the country was the eighth-largest importer of LNG in 2009. The longest-operating LNG terminal in the UK is National Grid’s Grain LNG terminal on the Isle of Grain. The facility originally became operational in 2005 when Phase I of the construction was completed. Additionally, Phase II has been completed in 2009 and the expected date of completion for Phase III is 2011. With the completion of Phase II, the terminal’s capacity increased to 1.4 Bcf/d. National Grid plans to expand the facility to 2 Bcf/d in time for the 2010/2011 winter.

Teesport LNG, operated by the U.S.-based Excelerate Energy, commenced commercial operation in February 2007. This was the first dockside regasification port and the second operational LNG facility in the UK Teesport LNG can deliver up to 600 MMcf/d of natural gas to the UK market

The Dragon LNG terminal, a collaboration of BG, Petronas, and 4Gas, commenced operation in September 2009. The import, storage, and regasification terminal is located in Milford Haven in South Wales and has a sendout capacity of 1.1 Bcf/d.

The South Hook LNG terminal, also located in Milford Haven, Wales, is owned and operated by Qatar Petroleum, ExxonMobil, and Total. Europe’s largest LNG terminal became commercially operational in October 2009 with an initial capacity of 1.1 Bcf/d. When fully commissioned (following the Phase II completion), the terminal’s capacity is expected to reach 2.1 Bcf/d.