Centrica has reopened Rough, Britain’s largest gas storage facility, but cautioned that it was not a “silver bullet” to solving energy security concerns this winter, with the site able to meet just 1 per cent of demand on a cold day.
Following months of speculation, Centrica said on Friday that the nearly 40-year-old facility off the Yorkshire coast would be reopened as a storage site this winter. For safety reasons given its age, it will be restarted in phases, initially operating at about 20 per cent of its previous capacity.
The site will be capable of storing 30bn cubic feet of gas this winter — equivalent to about nine tankers of liquefied natural gas — which will again allow it to regain its status as the country’s largest gas storage facility.
Rough was closed to new gas injections in 2017 when Centrica decided it was no longer economic to operate it as a storage site. Since then it has operated as a production facility.
However, the energy company, which owns British Gas, said limitations to how quickly gas could be withdrawn from the facility in an emergency meant it alone would not be a panacea if there was a gas shortage this winter.
Chief executive Chris O’Shea said on Friday that while Rough was “not a silver bullet for energy security”, he believed the facility would be able to make a difference by providing heat for 1mn homes — 3.5 per cent of the UK housing stock — for more than 100 days.
Centrica’s estimates are based on average daily demand last winter. O’Shea conceded that on a cold day the facility might be able to meet less demand.
Its forecast that gas could be withdrawn at a rate of 4.5mn cubic metres a day would meet only about 1 per cent of demand on a cold winter day, according to forecasts from National Grid, which oversees Britain’s gas system.
Grant Shapps, business and energy secretary, on Friday welcomed Rough’s reopening before winter, saying it would “further strengthen the UK’s energy resilience and make us less susceptible to Putin’s manipulation of global gas supplies”.
O’Shea said the reopening of the site was likely to help reduce consumer energy bills by smoothing out extreme peaks in prices, although he was unable to quantify by how much.
Centrica had previously been in talks with the UK government over a regulatory model that would make it more economic to reopen Rough. However, significant falls in gas prices in recent weeks have made it cheaper to refill the site. UK gas prices have plunged more than 60 per cent since late August, but are expected to rise again as the weather gets colder.
“We have got enough visibility of gas prices over this winter to be able to run it with no need for any regulatory support model,” O’Shea said, although he added that a financing mechanism would still be required to fulfil the company’s long-term aim of refurbishing Rough to become Europe’s biggest hydrogen storage site.
Low-carbon hydrogen is viewed by many policymakers and companies as a significant tool in decarbonising heavily polluting industries such as steel and chemicals.
Investec analyst Martin Young said reopening Rough would be highly profitable for Centrica, with the potential to earn the company £5mn a day by injecting gas at current lower prices and then selling it early next year when prices are forecast to be higher.
Critics of Britain’s energy strategy have long bemoaned the government’s decision to allow Centrica to close the site as a storage facility. Until Russia’s full blown invasion of Ukraine, the UK had pursued a “just-in-time” approach to gas supplies, relying on pipeline imports from the continent and cargoes of LNG to meet demand that couldn’t be supplied from domestic sources.
However, even with the reopening of Rough the UK still has some of the lowest levels of gas storage in Europe at nine days, compared to Germany at 89 days, France at 103 days and the Netherlands at 123 days, Centrica said.
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