The Gas Industry Market Report 2002

This report analyses the UK gas industry, focusing mainly on downstream activities. It gives an account of the roles of gas transporters, shippers and suppliers and provides analysis on the industrial, commercial and domestic markets. Also covered in this report is the generation of electricity using gas as the primary energy source.

In 2001, gas production was up by 20% on the figures recorded in 1998 but 2.2% below the 2000 value. In the next 5 years, production from UK gas fields is expected to decline as reserves begin to be consumed. In 2001, the volume of UK gas consumption was 1,119,612 gigawatt hours (GWh) and 27.8% of this was used for electricity generation. Around a third is used in the domestic market.

In 2001, the total value of gas sales reported an increase of 13.6% on the 2000 figure.

As a result of the privatisation of the national gas company and the 1995 Gas Act, along with the introduction of the EU Gas Directive, the UK gas industry is now a fully open market with a diversity of players. Companies now operating in the UK gas market include gas companies, electricity companies and multi-utilities, some of which are foreign owned.

This report profiles major players in the market, including BG Group PLC, Centrica PLC, Lattice Group PLC (which owns Transco), Innogy PLC, TXU Europe Ltd, Powergen PLC and Scottish Power UK PLC. European companies have increased their stake in the UK gas market with the imminent takeover of Innogy by a German operator, RWE, and the recent bid for Powergen by E.ON, also of Germany.

The UK gas industry faces a number of challenges. Although the UK has recently become a net exporter of gas, within the short-term, the volume of imports will continue to rise. UK gas is being exported to continental Europe because gas prices there are linked to oil prices, thus giving producers increased revenues. Rising UK gas prices are currently a topical issue and this trend contributes to increases.

A major use of gas is in gas-fuelled plants for power generation, but falling wholesale electricity prices - largely resulting from the New Electricity Trading Arrangements (Neta) - are causing generators to cease production from some power stations. In relation to the current, very competitive UK electricity market, there is overcapacity in power plants - a factor which will dampen interest in building new plants in the immediate future. There is likely to be further consolidation in the power generation sector in the near future.

The Future gas consumption through the natural transmission system will be 1,221 terawatt hours (TWh) in 2006, which is 8.8% more than in 2002. SHOW LESS READ MORE >

TABLE OF CONTENTS:<BR><BR>Executive Summary 1<BR><BR>1. Market Definition 8<BR><BR>REPORT COVERAGE 8<BR>Gas Transport and Transporters 8<BR>Gas Shippers 8<BR>Gas Suppliers — Domestic and Small Business 8<BR>Gas Suppliers — Industrial and Commercial 8<BR>MARKET SECTORS 9<BR>MARKET TRENDS 9<BR>Decline in Production 9<BR>Rise in Prices 9<BR>Market Structure 9<BR>MARKET POSITION 10<BR>The UK 10<BR>Table 1: UK Production of Primary Fuels for the UK Energy Supply by Type of Fuel by Volume (million tonnes of oil equivalent), 1998-2001 10<BR>Table 2: UK Primary Energy Demand by Type of Fuel by Volume (million tonnes of oil equivalent), 1999-2001 11<BR>Table 3: Fuel Used in UK Electricity Generation by Type of Fuel by Volume (million tonnes of oil equivalent), 1997-2001 12<BR>Overseas 12<BR><BR>2. Market Size 13<BR><BR>THE TOTAL MARKET 13<BR>UK Sales by Volume 13<BR>Table 4: UK Upstream Gas Production and Supply by Volume (gigawatt hours), 1999-2001 13<BR>Table 5: UK Downstream Gas Transmission Input and Output (gigawatt hours), 1999-2001 14<BR>Total Consumption by Volume 14<BR>Table 6: Total UK Consumption of Natural Gas by Type by Volume (gigawatt hours), 1998-2001 14<BR>UK Sales by Value 14<BR>Table 7: Total UK Natural Gas Sales by Sector by Value at Current Prices (£m and %), 1997-2001 15<BR>BY MARKET SECTOR 15<BR>Domestic 15<BR>Table 8: Total UK Domestic Consumption of Natural Gas by Volume (gigawatt hours and %), 1998-2001 16<BR>Electricity Generation 16<BR>Table 9: Total UK Consumption of Natural Gas for Electricity Generation by Volume (gigawatt hours and %), 1998-2001 17<BR>Industrial 17<BR>Table 10: Total UK Industrial Consumption of Natural Gas by Volume (gigawatt hours and %), 1998-2001 17<BR>Commercial and Other 17<BR>Table 11: Total UK Consumption of Natural Gas in Other Sectors by Volume (gigawatt hours and %), 1998-2001 18<BR>OVERSEAS TRADE 18<BR>Table 12: UK Imports and Exports of Gas by Value (£m), 1995-2001 19<BR>Table 13: UK Imports and Exports of Gas by Volume (million tonnes of oil equivalent), 1998-2001 19<BR><BR>3. Industry Background 20<BR><BR>RECENT HISTORY 20<BR>NUMBER OF COMPANIES 21<BR>Table 14: Number of VAT-Based Enterprises Engaged in the Manufacture of Gas and the Distribution of Gaseous Fuels Through the Mains by Turnover Sizeband (number of enterprises), 2002 21<BR>EMPLOYMENT 22<BR>REGIONAL VARIATIONS IN THE MARKETPLACE 22<BR>Table 15: Gas Consumption by Domestic and Small Business Customers in Great Britain by Region by Annual Demand (000 consumers and gigawatt hours), 2001 22<BR>Table 16: Gas Consumption by all Customers in Great Britain by Region by Annual Demand (000 consumers and gigawatt hours), 2001 24<BR>DISTRIBUTION 25<BR>HOW ROBUST IS THE MARKET? 25<BR>LEGISLATION 26<BR>European and UK Legislation 26<BR>Regulation by Ofgem 27<BR>KEY TRADE ASSOCIATIONS 27<BR>Energy Industries Council 27<BR>Energy Information Centre 28<BR>Eurogas 28<BR>Gas Forum 29<BR>Institution of Gas Engineers 29<BR>International Gas Union 29<BR>Society of British Gas Industries 29<BR><BR>4. Competitor Analysis 31<BR><BR>THE MARKETPLACE 31<BR>Broadly-Based Multi-Utilities 31<BR>Electricity Companies 31<BR>Large Vertically-Integrated Companies 31<BR>Marketing Companies 31<BR>Specialist Companies 31<BR>MARKET LEADERS 32<BR>Aquila Energy Ltd 32<BR>Company Structure 32<BR>Current and Future Developments 33<BR>Financial Results 33<BR>BG Group PLC 33<BR>Company Structure 33<BR>Current and Future Developments 34<BR>Financial Results 34<BR>Centrica PLC 34<BR>Company Structure 34<BR>AA Road Services and Personal Finance 34<BR>UK Energy Supply 34<BR>Goldfish Financial Services 35<BR>Home Services 35<BR>Telecommunications 35<BR>The US 35<BR>Current and Future Developments 35<BR>Financial Results 36<BR>Innogy PLC 36<BR>Company Structure 36<BR>Current and Future Developments 37<BR>Financial Results 37<BR>Table 17: Turnover for Innogy Holdings PLC by Sector by Value (£m), March 2000-March 2001† 38<BR>Lattice Group PLC 38<BR>Company Structure 38<BR>Transco PLC 38<BR>Telecommunications 38<BR>Lattice Enterprises 39<BR>Current and Future Developments 39<BR>Financial Results 40<BR>LE Group PLC 40<BR>Company Structure 40<BR>Current and Future Developments 40<BR>Financial Results 41<BR>Northern Electric PLC 41<BR>Company Structure 41<BR>Current and Future Developments 41<BR>Financial Results 41<BR>Powergen PLC 42<BR>Company Structure 42<BR>Current and Future Developments 43<BR>Financial Results 43<BR>Scottish Power UK PLC 43<BR>Company Structure 43<BR>Current and Future Developments 44<BR>Financial Results 44<BR>Scottish and Southern Energy PLC 44<BR>Company Structure 44<BR>Current and Future Developments 45<BR>Financial Results 45<BR>SEEBOARD Group PLC 46<BR>Company Structure 46<BR>Current and Future Developments 46<BR>Financial Results 46<BR>Shell Gas Ltd 46<BR>Company Structure 46<BR>Current and Future Developments 47<BR>Financial Results 47<BR>TXU Europe Ltd 47<BR>Company Structure 47<BR>Current and Future Developments 47<BR>Financial Results 48<BR>Other Companies 48<BR>Dynergy Storage Ltd 48<BR>Gas Transportation Company Ltd 49<BR>Gaz de France 49<BR>Mobil Gas 49<BR>Statoil 49<BR>United Utilities PLC 49<BR>OUTSIDE SUPPLIERS 50<BR>Exhibitions 51<BR><BR>5. Strengths, Weaknesses, Opportunities and Threats 52<BR><BR>STRENGTHS 52<BR>WEAKNESSES 52<BR>OPPORTUNITIES 52<BR>THREATS 53<BR><BR>6. Buying Behaviour 54<BR><BR>GAS CONSUMPTION 54<BR>Table 18: UK Consumption of Natural Gas by Sector (gigawatt hours), 1999-2001 54<BR>Industrial Customers 55<BR>Commercial and Other Customers 56<BR>Domestic Customers 56<BR>Table 19: Householders' Expenditure on Energy by Type of Fuel and Power at Current Prices (£m), 1990, 1995, 1998, 1999 and 2000 56<BR>Table 20: UK Householders' Expenditure on Energy by Type of Fuel and Power at Constant 1995 Prices (£m), 1990, 1995, 1998, 1999 and 2000 57<BR>Table 21: Average Expenditure on Fuel per Consuming UK Household (£ per week), 1995/1996-1999/2000 58<BR><BR>7. Current Issues 59<BR><BR>SECURITY OF CURRENT GAS SUPPLIES 59<BR>Security of Future Gas Suppliers 59<BR>GAS PRICES 59<BR>Table 22: Average Net Selling Value of Gas (pence per kilowatt hour), 1997-2001 60<BR>Electricity Generation 60<BR>ELECTRICITY PRICES 60<BR>CORPORATE ACTIVITY 61<BR><BR>8. The Global Market 62<BR><BR>WORLD RESERVES AND PRODUCTION 62<BR>Table 23: World Gas Consumption and Forecast Gas Consumption (trillion cubic feet), 1999, 2005, 2010, 2015 and 2020 62<BR>EUROPEAN RESERVES AND PRODUCTION 63<BR>Table 24: European Gas Consumption and Forecast Gas Consumption (trillion cubic feet), 1999, 2005, 2010, 2015 and 2020 63<BR><BR>9. Forecasts 64<BR><BR>INTRODUCTION 64<BR>FORECASTS 2002 TO 2006 64<BR>Table 25: Forecast Total UK Consumption of Natural Gas by Volume (terawatt hours), 2002-2006 65<BR>Table 26: Forecast Total UK Natural Gas Sales by Value at Current Prices (£m), 2002-2006 66<BR>FUTURE TRENDS 66<BR>Importance of Gas 66<BR>Gas for Power Generation 66<BR>Renewable Energy 66<BR>Upstream Trends 66<BR>More Foreign Company Activity in the UK Market 66<BR>Multi-Utilities 67<BR><BR>10. Company Profiles 68<BR><BR>BG GROUP PLC 69<BR>Centrica Plc 71<BR>INNOGY PLC 73<BR>LATTICE GROUP PLC 75<BR>Powergen Plc 77<BR>SCOTTISH POWER uk PLC 79<BR>txu europe ltd 81<BR><BR>11. Further Sources 83<BR><BR>Associations 83<BR>Publications 85<BR>Directories 86<BR>General Sources 86<BR>Bonnier Information Sources 87<BR>Government Publications 88<BR>Other Sources 89