Jacobs Engineering Secures FEED Contract for Centrica's Underground Gas Storage Facility in Yorkshire

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Researched by Industrial Info Resources (Sugar Land, Texas)--Jacobs Engineering Group Incorporated (NYSE:JEC) (JEC) (Pasadena, California) has secured a front-end engineering and design (FEED) contract from Centrica plc (OTC:CPYYY) (Windsor, United Kingdom) for the latter's underground gas-storage facility planned in Yorkshire in the U.K. Under the contract, JEC will convert the nearly empty Caythorpe onshore gas field near Bridlington into an underground gas-storage facility and develop the necessary infrastructure, consisting of onshore processing facilities and connector pipelines.

The Caythorpe site, located in the vicinity of the national transmission system, has a potential storage capacity of 7.5 billion cubic feet of gas, equivalent to about 4% of the U.K.'s gas-storage capacity.

Centrica acquired Caythorpe Gas Storage Limited late last year from Warwick Energy (Warwick, United Kingdom) in an all-cash deal amounting to $1.13 billion. Centrica also owns the 118-billion-cubic-foot facility at the Rough gas field, which is located offshore of Easington and holds about 70% of the country's gas.

The conversion exercise at Caythorpe will be carried out at an additional investment of $1.62 billion, and the facility is expected to be operational by early 2012. The facility at Caythorpe is being designed to have faster withdrawal and injection rates than the facility at Rough.

Centrica has also initiated a preliminary study for the conversion of the Bains gas field, a depleted gas field near Morecambe Bay, into an underground storage facility with a capacity of 20 billion cubic feet. This venture is expected to be operational at the same time as Caythorpe.

JEC, a leading service provider across technical, professional and construction sectors, has executed several similar projects in Europe. The firm is currently providing pre-engineering services for the second phase of the underground gas-storage facility project in Aldbrough for Scottish and Southern Energy plc (LSE:SSE) (SSE) (Perth, United Kingdom) and StatoilHydro ASA (NYSE:STO) (Stavanger, Norway). JEC was involved in the design and program-management aspects during the first phase of operations at Aldbrough and is presently providing construction management services for the program.

As part of the first phase of the venture, SSE and StatoilHydro plan to develop nine gas-storage vaults with a combined capacity of 420 million cubic meters at a total investment of $470.4 million. Scheduled for commissioning later this year, the first phase of the project will make the facility the largest storage unit in the country. As part of the second phase, nine additional underground vaults have been planned, including a few expansions to the facilities at the ground level.

As gas supplies from the North Sea continue to decline, gas imports and storage are beginning to play increasingly major roles in the fuel sector of the U.K. About 40% of the present gas demand is met by imports. The country's present storage facilities cater for only 4.4 billion cubic meters, equivalent to 5% of the country's average annual demand. By 2020, the U.K. plans to increase its storage capacities to cover about 20% of demand. According to the National Grid's recent "Ten Year Statement," 17 commercial gas-storage ventures are already in various stages of development. Upon successful completion, these projects are expected to help the U.K. achieve its gas-storage targets.

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