Due to a dispute with ministers over funding, the owner of Britain’s largest storage site for gas has indicated that it will not be operational at its full capacity next winter.
Chris O’Shea is the chief executive at FTSE 100 energy giant Centrica. He stated that the company would require some government support in order to fully reopen Rough storage.
He said that the former mothballed facility in caverns beneath the North Sea is now operating at approximately 20pc capacity for this winter, and will be able to supply about 1.5pc peak winter demand.
To increase it next year, and for long-term use, the company seeks support similar to that offered to electricity interconnectors. In this case, risk and reward are shared with consumers.
After months of negotiations with the Government, Mr O’Shea stated that he believes a short-term deal was unlikely and that the site will not be fully operational for the winter.
British Gas brings back Rough gas storage site following a five-year halt
He said, “We are very eager to invest in that. It is the right thing to do for our customers. It’s right for the UK. This is a long-term asset. We should think about the next 40years, not the next forty weeks.
This asset is similar to an interconnector. You have infrastructure investment and the capacity. The model for interconnectors would work very well with the Rough Field, I believe.
“But, I’m not in the government. They have to consider other factors.
The government has been reluctant to subsidize storage sites. preferring to let the market forces operate on its own.
Centrica closed Rough in 2017, as falling winter gas prices rendered it uneconomical to operate.
It requested to reopen the site in June amid a scramble for gas supplies amid Russia’s war against Ukraine.
The site has been reopened due to falling gas prices. This is due to lower fuel costs and higher European storage levels. There is an opportunity for arbitrage as prices are expected to rise in December/January.
Mr O’Shea stated that he can see the logic and it makes sense. As we purchase the gas, we have been investing a lot of money in this.
“But then, we entered into a contractual agreement to sell that gas forward when we see that there will be the greatest demand.”
The site is currently being filled with approximately 30bn cubic yards of gas, which is about 20% of its capacity prior to 2017.
It can safely draw gas at a speed that is comparable to taking out approximately one million houses per day.
Although the supply is not sufficient to meet the national demand, it could be of assistance to the UK if imports are short due to Russia’s war against Ukraine.
The loss of Russian supplies to Europe is expected to make next winter extremely challenging for energy security.
Centrica plans to eventually convert the field into hydrogen storage, a clean-burning fuel that is in increasing demand as part of the effort to reduce carbon emissions.
Grant Shapps, the energy and business secretary, stated that “The reopening of the Rough gas storage facility in advance of winter will further strengthen the UK’s energy resilience and make it less vulnerable to Putin’s manipulations of global gas supplies.”
