Offshore natural gas storage and offshore LNG unloading

The DTI has issued a consultation document for improving the regulatory framework for offshore natural gas storage (excluding carbon dioxide) and offshore LNG unloading.

There is considerable market interest in developing the UK’s offshore gas supply infrastructure through LNG unloading facilities and storage facilities in either hydrocarbon features involving the conversion of partially depleted oil and gas fields or in non-hydrocarbon features such as salt caverns. However, the current regulatory framework is unclear and complex, and does not deal adequately and efficiently with the range of activities that the market is considering. The Government therefore proposed this consultation in the Energy Review report: the Energy Challenge, published in July 2006.

The DTI has outlined the following options in its consultation paper:

• maintain the existing framework but provide additional guidance
• maintain the existing framework but extend its scope beyond the existing 12 nautical mile limit of the UK’s territorial waters
• introduce a new regulatory framework in the form of specific licences for natural gas storage and offshore LNG unloading.

The Natural Gas Storage Licence (NGSL) would be issued with terms similar to a Petroleum Production Licence and would be required for storage in both hydrocarbon and non-hydrocarbon features. Crown Estate authorisation would continue to be required for both types of storage, as well as a Petroleum Production Licence for storage in depleted oil and gas fields. The LNG unloading licence would be issued for the construction of the offshore platform and associated pipelines, and the ongoing operation of the facility. Crown Estate authorisation would also be required.

The consultation paper, which sets out the current regulatory framework as well as the proposals for improving it, also highlights other relevant issues such as environmental and decommissioning requirements, HSE and third party access.

Responses to the consultation are to be submitted by 16 February 2007. The results of this consultation together with other consultations (e.g. new measures on gas security of supply) will be drawn upon in the new Energy White Paper to be published next year.