Policy paper

Midstream gas system: update to the market

Published 30 June 2025

Applies to England, Scotland and Wales

Ministerial foreword

The UK’s energy system is undergoing a once-in-a-generation transformation. As we work to become a Clean Energy Superpower, we are reshaping how we power our homes, our businesses, and our economy—reducing bills, strengthening our energy security, and driving down emissions.

Gas has been central to our energy story for decades: providing over a third of the energy we consume, heating the vast majority of our homes, and playing a critical role in electricity generation and industrial production.

But the role of gas is changing. As we accelerate the shift to clean power, gas will play a much smaller role in electricity generation. As we roll out cleaner heating solutions, fewer homes will rely on gas boilers. And as we decarbonise industry, we will see a growing role for carbon capture and low-carbon gases like hydrogen and biomethane, as well as increased electrification.

This Update to Market is the first major publication on the gas system in many years. It sets out the government’s understanding of the changes ahead and the steps we are taking to manage the transition in a way that is secure, affordable, and fair. It identifies three key aims: maintaining resilience as domestic production declines, ensuring continued investment in infrastructure while protecting consumers, and managing a planned, orderly transition of the gas network.

These are important issues that also affect the many businesses and workers across the gas sector whose skills and experience will be vital to our future energy system. That is why this document is not just a technical update­—it is the beginning of a wider conversation about the future of gas in Britain. It is a conversation which must be had in partnership—with industry, with workers, and with consumers.

This publication marks the start of that process. It is the first step in a long-term programme of work to ensure that the gas system supports our net zero ambitions while continuing to deliver for the British people. I look forward to working with all those who have a stake in this transition to build a cleaner, stronger, and more secure energy future.

The Rt Hon Michael Shanks MP
Minister for Energy

Introduction

The government is committed to making Britain a Clean Energy Superpower and driving rapidly towards home grown clean energy that brings down bills for households and business for the long term. Natural gas (‘gas’) will continue to play an important role during this transition, and is essential to the nation’s current energy system, providing 37% of the energy consumed in Great Britain in 2024^{[footnote 1]}. 35% of electricity was produced using natural gas in 2023^{[footnote 2]}, gas met 37% of demand in industry in 2023^{[footnote 3]}, and 85% of British homes are connected to the gas grid for heating^{[footnote 4]}.

Our Clean Energy Superpower Mission will see gas playing a significantly reduced role for power generation, with clean sources producing at least 95% of Great Britain’s generation by 2030, and the upcoming Warm Homes Plan will set out next steps to support households to move off gas boilers towards cleaner and cheaper alternatives.

However, gas will have a crucial part to play in supporting our energy transition. Gas will continue to heat many of our homes and fuel hard-to-decarbonise industry for years ahead, and gas will retain a role post-2050, using carbon-neutral gas from green or offset sources. It will remain important for electricity security, and Great Britain will continue to maintain an expected 35 GW of unabated gas-fired reserve generation capacity as a key part of our Clean Power 2030 Action Plan, as gas moves into a reserve role. Our natural gas infrastructure will also continue to be a valuable asset in the future, with biomethane, carbon capture, usage and storage (CCUS) and hydrogen all emerging as potential components of a more sustainable, longer-term future for the gas network. 

The transition and accompanying shifting role of gas in our energy system will come with changes that will need to be carefully managed to ensure ongoing energy resilience, affordable bills, and a transition that is fair for households, workers and industry.

The department has identified three key transitional challenges up to 2050 and will be considering these as part of a long-term programme of work. These are:

1. Ensuring resilience of gas supply and infrastructure – as gas supply from the super-mature North Sea basin naturally declines over the medium-term and Great Britain uses more Liquefied Natural Gas and associated terminal infrastructure and storage facilities to manage both annual and peak day demand.

2. Balancing infrastructure investment and affordability – by maintaining investor confidence to support ongoing maintenance and investment needed in the gas system to ensure safety, resilience and capacity, while managing the fair and distributed recovery of those costs with a gradually decreasing gas consumer base.

3. Managing a planned and orderly operational transition – by repurposing infrastructure assets where possible, and decommissioning other assets where no longer needed, in a systematic and planned way that recognises the scale and complexity of the gas network nationwide and its integration into our daily lives.

This is the first publication of an ongoing programme of work and marks the beginning of a public engagement process on gas in transition, setting out the government’s understanding of the changes involved, and next steps to deliver them. The gas system has ensured gas supply across recent decades and will play an important role in our future energy system. The successful transition of the gas system can only be achieved in partnership with the gas sector and workers, and the government welcomes engagement on all these critical topics over the months and years ahead.

Ensuring resilience of gas supply and infrastructure

Already more than half the gas the UK uses is imported. Fortunately, Great Britain currently benefits from a wide variety of gas supply sources, as shown in Figure 1 below. This includes gas transported via pipeline from the UK and Norwegian Continental Shelves in the North Sea (comprising 43% and 35% of the UK’s gross annual gas supply, respectively, over 2020-2024), as well as Liquefied Natural Gas ((LNG), 21%) and interconnector pipeline imports from Belgium and the Netherlands (1%). Great Britain’s eight gas storage sites also provide an effective source of system flexibility when responding to short-term changes in supply and demand or during cold winter months.

Over the medium-term, our future supply mix will change as domestic North Sea and Norwegian production—which Great Britain has historically been dependent on—are projected to decline due to the natural geological depletion of North Sea gas basins^{[footnote 5]}. There is an important role for LNG and interconnector imports to meet demand, even as this demand declines over time. Additionally, Great Britain will continue to be exposed to potential volatility in the global fossil fuel market, including geopolitical shocks, which may affect gas prices for consumers. This is why meeting our mission to achieve clean power by 2030 and accelerate to net zero in the wider economy is so important for our national energy security

Figure 1 – Five Year Average Gross UK Annual Gas Supply (2020-2024)^{[footnote 6]}

Great Britain has historically benefitted from utilising both its gas interconnectors and LNG imports as flexible sources of supply, consistently being able to attract the gas we need. Great Britain needs to ensure:

• The continued resilience of existing import infrastructure.
• Sufficient infrastructure capability (including potentially expanded capability) to meet a broad range of possible daily demand.
• The continued reliable delivery of the gas we need, when we need it, in the context of a changing supply mix.

Figure 2 – Map of Great Britain’s Gas Supply, Transmission and Demand Systems, provided by National Gas

The government recognises that a smaller and more uncertain gas market can present commercial challenges, including for those operating key parts of midstream gas infrastructure (such as storage sites and import infrastructure). As gas demand falls, there will be opportunities for businesses in the gas industry to move into other parts of the energy system, including renewable electricity, CCUS, hydrogen and biomethane^{[footnote 7]}.  As such, some infrastructure operators are evaluating whether to switch to other revenue sources, although precise demand for some of these alternatives is still uncertain. This adds an additional layer of complexity to our future gas supply.

Given these challenges, the government is prioritising the resilience of our gas system and infrastructure, for homes, businesses and industry whilst Great Britain transitions to cleaner energy and a net zero system. Great Britain must retain its ability to attract, land, store and distribute gas wherever it is needed, and to ensure that we are sufficiently insulated from potential issues (such as global shocks, unplanned outages, or unexpected exits from the market) by having sufficient flexibility in the system.

Within this package of work, the government will focus on the future needs of our gas system and potential developments in gas infrastructure, markets, and regulations. An assessment will be made of how these changes might affect our ability to attract and supply gas going forward, and work with the sector and regulator to identify any mitigating actions needed to ensure the necessary resilience and flexibility in the system. The government will assess whether any government intervention is required to support the gas system and what form such intervention could take, considering the specific needs case and ensuring value for money for consumers and taxpayers. Types of interventions that could be considered include (but are not limited to):

• Regulatory changes to reduce barriers and ensure frictionless trade (for example, barriers impacting LNG and interconnector imports).
• Supporting the resilience of existing import, transmission and distribution infrastructure.
• Transitional support for the market to continue where national need remains but the market shrinks—for example, through longer-term commercial support, such as a cap and floor mechanism.
• Supporting the development of new infrastructure capability where necessary.

The government is aware that, given the potentially long lead-in times around both investment in infrastructure and regulatory reform, there is a need to act promptly. The government will therefore launch a consultation on gas system resilience in the autumn that seeks views on the need for government action and proposed interventions.

Balancing infrastructure investment and affordability

The gas network continues to play a vital role in the UK energy system—keeping homes and businesses safe and warm, supporting resilience, and enabling the transition to net zero. To remain safe, reliable and affordable, it requires ongoing investment. However, as gas demand declines and more households switch to low-carbon heating options like heat pumps, fewer consumers are expected to stay connected to the network.

Currently, the cost of maintaining and operating the network does not fall in proportion to the number of users. At the same time, investors need confidence that they will get a fair return on their investment, including money already spent on the network. Combined, this could create a more challenging environment for investment and in the longer-term could increase the risk of higher costs for the remaining gas users. Therefore, it is important to ensure the right conditions for continued investment, helping to maintain a resilient gas network that can continue to meet demand and operate safely throughout the transition to net zero, while also ensuring that this transition is fair and affordable for all energy consumers.

How does investment in the gas network work?

• Investment is primarily required to replace assets in the gas distribution networks that have reached the end of their useable life or are in poor condition.
• When networks invest in their assets this is added to the Regulatory Asset Value, or RAV.
• This RAV is the amount of outstanding capital value that needs to be repaid.

Part of the allowed revenue for the networks includes a depreciation payment (to pay back the RAV) and a return on their investment based on the remaining RAV. This is recovered through network charges on a gas consumer’s bill.

Because gas networks are natural monopolies, Ofgem sets price controls every five years which determines the amount they can charge customers. This also influences the amount they can invest, what assets they can invest in, and the returns investors can expect. This process impacts investors, network companies, and consumer bills. Ofgem is currently working on the RIIO-3 price control framework for 2026-2031, which will determine the investment allowed for maintaining the gas network and how and when these costs will be recovered from consumers.

If the number of gas users falls significantly before investors have recovered the historic cost of developing the gas network—the Regulatory Asset Value— this could create challenges for investability and consumer affordability. An increased perception of “asset stranding” risk and a user base declining more quickly than operational costs could add pressure to investors and consumers.

To help manage this, Ofgem has consulted on the introduction of Accelerated Depreciation (AD) for gas distribution networks from 2026. This approach would allow investment to be recovered more quickly through higher network charges over a shorter period and helping to ensure investment costs are recovered while there is still a critical mass of gas consumers, to avoid charges increasing rapidly into the 2040s. However, this approach would also bring challenges, including concerns about the impact on consumers and long-term confidence in infrastructure investment.

Figure 3 – Residential annual gas demand for heat (FES 2024)^{[footnote 8]}

While the price control is a matter for Ofgem, the government recognises the significant investment needed to keep networks operating safely, while protecting consumers’ interests. Importantly, there are credible longer-term alternatives to support cost recovery—including those that could distribute costs more fairly—and with coordinated action, and a key role for government, there is time to develop balanced and sustainable solutions. Now is the right time to explore these options with the sector and ensure the system remains fair, resilient, and fit for the future.

An alternative financial model will take time to identify and roll out but could complement or replace the existing model (and will be considered alongside the other long-term challenges facing the network), making significant change unfeasible before RIIO-4. Depending on the option chosen, it may therefore not be necessary or appropriate for a new model to begin until later price control periods. However, the government recognises the importance of clarity and stability, and therefore aim to decide on policy to inform investment recovery prior to the commencement of RIIO-4.

Alongside this, the government will assess how gas distribution network disconnections and the policies that govern them operate. It is important to review the current regulations—working with Ofgem and the Health and Safety Executive (HSE) —to clarify the costs involved, how they should be recovered, and whether changes are needed. The aim of this work is to provide clarity to the sector, support a fair and affordable transition for those still connected to the gas network, and ensure that people are encouraged to switch to clean heat.

While any alternative approaches may take time to implement, the government wants to reassure the sector that we recognise the importance of this challenge and are committed to working closely with them and the regulator to identify solutions that ensure ongoing and long-term investment. The aim is to transition the gas network in a way that is fair and affordable for all energy consumers, aligning long-term energy security with investor needs and expectations throughout the transition to net zero.

To build our evidence base regarding this challenge, the government will publish a call for evidence on network investment and affordability in the autumn that will seek views on alternative investment recovery options.

Managing a planned and orderly operational transition

Great Britain’s natural gas network forms a significant part of our energy system, and consists of over 280,000 km of transmission and distribution pipework (shown in figure 4 below), as well as a range of supporting infrastructure, such as compressor stations, valves, and governors. From the import infrastructure that brings gas to Britain, to the pipes that convey it to users, each part of this system plays a crucial role in ensuring that natural gas continues to provide heating for homes and businesses, and to support power generation and industry. With gas demand declining in the coming decades, the role of the gas network may need to change. The transition away from natural gas will impact gas consumers and the sector, and the government will develop future gas policy that ensures consumers and those working in the gas sector are protected and supported.

There are various options for the future of the gas network, including its continued use with carbon neutral or negative gases like biomethane, repurposing part of the infrastructure for other energy uses, such as the conveyance of hydrogen or carbon dioxide (for CCUS), and supporting demand for low-carbon technologies and their associated infrastructure. There may also be opportunities to repurpose pipework for other non-gaseous uses, such as acting as a conduit for new electricity and fibre optic cabling. Where repurposing is not viable, long-term consideration will be needed regarding potential decommissioning of gas network infrastructure. Any repurposing or decommissioning approach needs to be consistent with enduring natural gas demand, for example, peak reserve power generation, as an industrial feedstock, and, in the longer term, the production of blue hydrogen.

To prepare, it will be necessary to consider the likely extent of network repurposing across a number of credible scenarios, understand where new infrastructure and pipes might be needed and where the network is likely to play less of a role in the future. Further to this, it will be crucial to understand wider interactions with other energy sources, how the existing highly skilled workforce can be supported, including into the new jobs and opportunities that will be created, and any safety implications of repurposing or decommissioning options. The government is as such developing a policy framework which examines the gas network transition and assesses the range of credible future scenarios. This includes how costs could be recovered, the legislation required, responsibility for assets and liabilities, and the governance, planning and oversight of an implementation process.

Alongside considering any large-scale changes to the way we use the gas network, the coming years will see an increasing number of consumers switching to alternative sources of clean heat and fuel. Ensuring a well-coordinated consumer transition is crucial, and could see long-term cost savings.

There are many different ways the government could coordinate the transition but, in any approach, we will carefully consider how delivery will be managed to ensure consumers – and in particular vulnerable consumers – are protected, how we enable a just and fair transition for the workforce, how the sector is supported, how we meet the needs of hard-to-decarbonise users, and how we ensure security of supply.

Figure 4 – Map of Great Britain’s Local Distribution Zones^{[footnote 9]} (left) and the National Transmission System^{[footnote 10]} (right)

The government will need to play a key role in planning what this phased, well-paced transition might look like and will need to work closely with consumers, industry and stakeholders across the energy system to understand the key risks and opportunities, provide clear communication, minimise any impact or disruption and ensure there is sufficient support throughout the transition.

To build our evidence base, the government will look to publish a call for evidence in 2026 that seeks views on how to ensure the transition is operationalised in a way that is fair, planned and orderly.

Case Study: Town Gas Transition

Great Britain’s gas demand used to be met by gas manufactured from coal, known as ‘town gas’. After the discovery of North Sea gas in 1965, 13 million homes, 80,000 commercial and industrial consumers, and 35 million appliances were converted to natural gas in a centrally coordinated process, mostly between 1967-1977. This was considered one of the UK’s biggest post-war engineering successes^{[footnote 11]}.

There is no question that the modern-day transition will be different in scale and complexity, but there are lessons from the town gas transition that can be learned and applied to the years ahead. These include:

1. Public engagement: Widespread public information campaigns mitigated concerns about the safety of natural gas in homes. The gas board ran showrooms in towns and cities to demonstrate new equipment, with representatives visiting the homes of vulnerable consumers.
2. Skills and workforce: Thousands of new gas engineers were trained to assist with the transition, with thirteen dedicated training schools being set up. These training schools were maintained throughout the transition to ease the impact of retirement and attrition.

The town gas case study demonstrates the ability of the Great British gas sector to successfully deliver a large-scale transition, supported by effective planning and engagement. These learnings will stand us in good stead as we design an approach that works for people in their homes in the years ahead, and in which industry takes a proactive role in enabling an orderly transition.^{[footnote 12]}

Next steps

As we work to make Britain a Clean Energy Superpower, the government’s work on gas in transition aims to ensure that during this period, our gas system is resilient and affordable, and in the longer term that there is a fair and orderly transition away from gas when and where it’s no longer needed.

As set out in this update, the upcoming milestones and opportunities to contribute to our policy development on meeting these aims include:

• A consultation on gas system resilience in early autumn.
• A call for evidence on network investment and affordability in late autumn.
• A call for evidence on transitioning the gas system in 2026.

The government welcomes views and feedback from all stakeholders throughout this process.

Annex: Background on the Great British gas system

The Great British gas network is a complex system designed to transport natural gas from production facilities to end-users across Great Britain. This network encompasses various components, including production facilities, transmission pipelines, distribution networks, and storage facilities. Natural gas, primarily composed of methane (CH₄), is a fossil fuel formed over millions of years from the remains of ancient organisms. It exists in two forms: dry gas, which is mostly methane, and wet gas, which contains other hydrocarbons such as ethane and butane.

Historically, the Great British gas network has evolved significantly since the discovery of large oil and gas deposits in the UK Continental Shelf (UKCS) in the 1970s. By 1993, natural gas had surpassed coal as an energy source, and by 1999, it accounted for 40% of the UK’s total inland energy consumption^{[footnote 13]}. However, since 1999, the role of natural gas has gradually declined due to increased adoption of renewable energy sources and efforts to reduce carbon emissions. Natural gas continues to play an important part in the energy system for heating, electricity generation, and industrial processes.

How the Gas System Works

Natural gas is extracted from underground reservoirs and processed to remove impurities, ensuring it meets quality standards before entering the transmission system. This processed gas is then transported through high-pressure transmission pipelines across Great Britain. National Gas transmission (NGT) is the System Operator of the National Transmission System (NTS), consisting of approximately 7,600km of pipelines and serving as the backbone of Great Britain’s gas transmission network. Interconnectors, such as the interconnector from Belgium (Interconnector Ltd) the Balgzand to Bacton Line (BBL), the Moffat Interconnector, and the Scotland Northern Ireland Pipeline (SNIP)^{[footnote 14]}, link the Great British gas network with other countries and regions, facilitating the import and export of gas. To maintain efficient gas flow, compressor stations are strategically located across the NTS to sustain the necessary pressure in the pipelines and move it to where it is needed.

Storage sites play an important role in balancing supply and demand fluctuations by storing gas during periods of low demand and releasing it during peak demand. Once the gas reaches local areas, it enters the distribution system, which operates at lower pressures to deliver gas to homes and businesses. The distribution network is divided into Local Distribution Zones (LDZs), managed by four Gas Distribution Network Operators (GDNs): Cadent, Northern Gas Networks (NGN), Southern Gas Networks (SGN), and Wales and West Utilities (WWU). This gas is then used for various purposes, including heating, cooking, and electricity generation.

Since 2005, LNG has provided the UK with a flexible source of supply, providing gas to meet our daily and annual gas energy needs. With capacity across three LNG terminals, the UK has the second largest LNG infrastructure in Europe, after Spain. The UK LNG terminals can receive deliveries from any LNG producing country in the world and the liquidity of the UK gas market makes the UK an attractive LNG destination.

The Size of the Gas System

The Great British gas network is extensive, covering various regions and facilities. The upstream supply includes indigenous production from the UK Continental Shelf (UKCS), imports from the Norwegian Continental Shelf (NCS), and LNG imports. Key regions for UKCS supply include the Northern North Sea, Central North Sea, Southern North Sea, West of Shetland, and the Irish Sea. Midstream operations involve processing facilities where gas is treated to meet quality standards before entering the transmission system. Major processing terminals include St. Fergus, Teesside, Easington, Bacton, Point of Ayr, Barrow, and Theddlethorpe. LNG, which is natural gas cooled to a liquid state for easier storage and transport, is handled at three terminals: the Isle of Grain, South Hook, and Dragon LNG terminals. Biomethane, a form of natural gas produced from renewable organic waste, is processed to meet the same quality standards as natural gas and can be injected into the gas network. Once processed, the gas enters the distribution or transmission system and is in turn delivered to domestic and business consumers across the country. Gas storage facilities – categorised into short-range, medium-range, and long-range storage – help balance supply and demand, especially during peak periods. Those storage sites include Aldbrough, Hatfield Moor, Hill Top, Holford, Hornsea, Humbly Grove, Stublach, and Rough.

Regulatory Framework

The regulatory framework ensures the safe, secure, and efficient operation of the gas network. The Gas Act 1986 is central to this framework, alongside various industry codes, licenses and standards. Key regulatory bodies such as DESNZ, Ofgem, and HSE ensure the framework is updated to reflect ongoing or upcoming changes to the gas system. Factors such as supply and demand, pricing, and geopolitical influences can impact the gas market. The Uniform Network Code (UNC) is the main commercial framework governing the transportation and supply of gas.

1. Seasonally adjusted provisional 2024 figures. April 2025 Energy Trends, Table 1.2, available at: https://www.gov.uk/government/collections/energy-trends   ↩

2. DUKES 2024, Table 5.6, available at: https://www.gov.uk/government/statistics/digest-of-uk-energy-statistics-dukes-2024. Whilst gas accounted for 34% of annual electricity produced in 2023, it can play an even larger role during days of low wind and sunlight. For instance, winter 2023/24 saw a daily peak of 61% of electricity produced by gas-fired power generation (see National Gas 2023/24 Winter Review, here: https://www.nationalgas.com/sites/default/files/documents/Gas%20Transmission%20Winter%20Review%20and%20Consultation_2024_0.pdf). ↩

3. DUKES 2024, Table.1.1, available at: https://www.gov.uk/government/statistics/digest-of-uk-energy-statistics-dukes-2024 ↩

4. DESNZ 2024, Subnational estimates of properties not connected to the gas network 2015 to 2023, available at: Subnational estimates of properties not connected to the gas network - GOV.UK ↩

5. According to the NSTA, domestic gas production on the UKCS is currently projected to decline by 11% annually. According to the Norwegian Offshore Directorate, production on the NCS is expected to start declining in ‘the later 2020s’. See https://www.sodir.no/en/whats-new/publications/reports/the-shelf/the-shelf-in-2024/oil-and-gas-on-the-shelf-moving-forward/. ↩

6. DESNZ analysis of Energy Trends data, available at: Energy Trends: UK gas - GOV.UK ↩

7. For instance, as part of the government’s Plan for Change and clean energy superpower mission, workers across the UK will be supported with government-backed training programmes in order to benefit from thousands of new job opportunities in the clean energy sector. For more information, see https://www.gov.uk/government/news/support-for-workers-to-benefit-from-thousands-of-clean-power-jobs ↩

8. Future Energy Scenarios: Pathways to Net Zero (ESO), p69, available at: https://www.neso.energy/document/321041/download ↩

9. The Gas Network, understanding the regions (Energy Solutions), available at: https://www.energybrokers.co.uk/gas/gas-network ↩

10. National Gas Transmission Ten Year Statement 2024, available at: https://www.nationalgas.com/sites/default/files/documents/17521_NGT_GTYS_2024_AW07b_INTERACTIVE.pdf ↩

11. Lesson Learnt: Past Energy Transition in the Gas Industry (Wales and West Utilities), available at: lessons-learnt-from-the-past.pdf ↩

12. Development of trajectories for residential heat decarbonisation to inform the Sixth Carbon Budget (Element Energy), available at: Development of trajectories for residential heat decarbonisation to inform the Sixth Carbon Budget (Element Energy) - Climate Change Committee ↩

13. DUKES 2024, Table 1.1.2, available at: https://www.gov.uk/government/statistics/digest-of-uk-energy-statistics-dukes-2024 ↩

14. The Northern Ireland Gas System is closely connected to that of Great Britain, with any changes to the Great British system likely to have an impact on Northern Ireland (and the Republic of Ireland). ↩