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Page last updated at 12:06 GMT, Monday, 6 November 2006

The high price of gas

By Steve Bradshaw
Reporter, Panorama

Gas pipes, Russia

Soaring gas prices in Britain are a symptom of the country's failure to spend its historic North Sea windfall wisely, experts have told Panorama.

Long-term this could mean higher prices for consumers, loss of jobs and even a threat to national energy security, senior industry figures have said.

Some experts believe the industry failed to plan for the current steep fall-off in domestic supplies.

They warn the UK will have to learn how to play power politics with energy.

"When North Sea gas was discovered there were a number of people in Britain who argued that at least a portion of the North Sea gas should be saved, as a national strategic reserve for the future in case Britain had a serious gas supply problem like it did last winter" said Paul Domjan who is a former energy security adviser to the US defence department.

"Sadly none of those people were listened to."

'New reality'

Gazpromo logo

For decades Britain has relied on a free market framework for energy policy but analysts in Panorama's film The High Price of Gas are concerned it has gone too far.

"A very big fault of the UK market model is it doesn't give the right signals for building storage, and it doesn't value security of supply in the way that it should" said Jonathan Stern of the Oxford Institute for Energy Studies.

Britain is also implicitly criticised by one of its own leading gas suppliers, EON Ruhrgas, which owns Powergen.

Dr Jochen Weise, director of gas supply and trading at EON Ruhrgas, said: "I think the issue is how do you tackle the challenges of a market which has been self-reliant for a long time, and becomes import dependent like we are in Germany?

"For me the key is to adapt your system to a new reality."

The challenge for Britain now, Panorama reports, is to be honest about the future.

Moscow at night

Mr Domjan said: ""Reliance on gas means that we're going to have to understand what's going on down the pipeline, that we're going to have to have an accommodation with the Russians, that we're going to have to learn how to play power politics with energy."

A potential lesson for Britain comes from Kazakhstan which has been mocked for its supposedly backward ways in the Borat film.

Nazym Sutbayeva, a young advertising executive, says Kazakhstan should save its newly discovered natural gas reserves "for our kids and the kids of our kids".

Some may wonder if Kazakhstan may not have the last laugh after all.

Panorama: The High Price of Gas was on BBC One on November 5 2006.

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