Centrica Shutting Largest Gas Storage Facility in U.K.

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--The closure of the U.K.'s largest gas storage facility by Centrica plc (OTC:CPYYY) (Windsor, England) will force the country to rely on increased liquefied natural gas (LNG) gas imports for the foreseeable future.

The company's Centrica Storage Limited (CSL) division has announced that it will permanently shut the Rough gas storage operation off the Yorkshire coast due to "high operating pressures." Rough, which began operations in 1985, accounts for 70% of the country's gas storage capacity, and the U.K. has no plans in the works to replace the facility.

"CSL has now completed the wells testing programme and has analysed the results of this extensive programme," the company stated. "CSL has also completed a review into the feasibility of returning Rough to injection and storage operations and concluded that, as a result of the high operating pressures involved, and the fact that the wells and facilities are at the end of their design life and have suffered a number of different failure modes while testing, CSL cannot safely return the assets and facilities to injection and storage operations."

It added: "From a commercial perspective, an assessment of both the economics of seasonal storage today, and the costs of refurbishment or rebuilding the facility and replacing the wells, suggests that both pathways would not be economic. As a consequence, CSL intends to make all relevant applications to permanently end Rough's status as a storage facility, and to produce all recoverable cushion gas from the field, which is estimated at 183 billion cubic feet."

The decision to shut Rough will increase the country's reliance on LNG imports from Qatar, which supplies about a third of total gas demand. The ongoing diplomatic crisis in Qatar may disrupt transportation. Qatar's neighbours, including Saudi Arabia, Egypt and the United Arab Emirates (UAE), have stopped trade and diplomatic relations with the country over allegations that key individuals and institutions have been funding terrorist groups including Islamic State and Al-Qaeda.

Industry group United Kingdom Onshore Oil and Gas (UKOOG) said the decision threatens security of supply going forward. It said that Rough plays a key role, able to hold nine days' worth of U.K. gas demand and over the year has been able to supply 10% of peak gas demand, usually in colder winter months.

Ken Cronin, chief executive of UKOOG, said: "The solution for the U.K. in the medium term cannot be to transport gas across oceans and continents. The U.K. needs to ensure that whatever gas replaces that of Rough comes from sources that can deliver the same high levels of environmental and regulatory standards. Only the development of the U.K.'s onshore resources just a mile under our feet can do this."

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