Oil & Gas UK Economic Report 2015

for about half the gas entering the NTS (67 bcm). NBP prices are closely correlated with hub prices in adjacent hub markets on the near-continent, notably Zeebrugge and the Dutch TTF (Title Transfer Facility) market, and reflect prevailing supply and demand conditions across north-west Europe. Although NBP prices respond to many of the same influences as oil prices, the divergent behaviour of NBP and oil price since 2014 to 2015 is worthy of note. UKCS gas producers faced a major fall in NBP prices in the first half of 2014, whereas the fall for oil producers was concentrated in the last few months of the year. Gas demand in Europe in 2014 fell 10.1 per cent to 452 bcm due to an exceptionally warm winter in

2013-14, the economic weakness of much of the Eurozone, price-induced demand restraint and further contraction of gas use for electricity generation in favour of coal and renewables. In the UK, total gas demand in 2014 was 70.2 bcm, the lowest since 1994. Even if corrected to take account of thewarmer-than-normal temperatures in 2014, demand would only be estimated at 75 bcm. Unlike most other EU countries, the UK recorded a slight increase in gas use for electricity generation, from 18.7 bcm to 19.8 bcm, as gas picked up market share after the permanent closure of old coal-fired plants. Based on provisional data for the first six months of this year and normal temperatures, UK gas demand in 2015 is expected to rise modestly to 72.5 bcm (plus 3.2 per cent).

Figure 6: UK Gas Demand by Sector

120

Domestic

Industrial

Electricity Generation Other Energy

Services

100

80

60

40

Gas Balance (bcm)

20

0

1995

2000

2005

2010

2015

Source: DECC, Oil & Gas UK projection

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ECONOMIC REPORT 2015