Centrica have announced today the closure of their Rough Storage facility, confirming that trying to continue operations at the UK’s largest gas storage facility is uneconomic given the ageing life of the facility and on-going concerns over safety.
In 1985, Rough Storage began operation after depletion of its natural gas reserves and was converted into a gas storage facility given the seasonal trends in gas usage in the UK. The facility consists of a gas storage facility off the coast of Yorkshire and an onshore gas processing terminal at Easington. The processing terminal forms part of a larger facility which can inject approximately 40% of the daily UK supply.
Rough Storage itself has a storage capacity of approximately 72% of the UK’s total gas storage capacity (approximately 9 days’ supply). It can also supply 10% of the UK’s peak gas demand and as such has always been an important part of the UK’s gas infrastructure over winter periods.
As of today, Rough remains the only depleted offshore gas field reservoir that is used for gas storage and retrieval. There have been other projects considered but none have proven economically viable, further reinforcing the fact that gas storage for peak winter periods remains a significant concern for the UK market.
The ageing facility has suffered numerous problems over the past few years and in April 2017 Centrica Storage Limited (CSL) the facility’s operator, announced that the site would be offline until Q2-2018 for testing as the facility is far beyond its operational life. All remaining storage facilities in the UK are medium-range or fast-cycle (smaller in capacity but quicker in withdrawal), emphasising deliverability over capacity.
“CSL has now completed the wells testing programme and has analysed the results of this extensive programme. 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.
Furthermore, 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.”
However, there have been structural changes in the UK/global gas markets:
While the markets have not reacted significantly this morning and given the risk of Rough storage being offline has been priced into the wholesale markets, it is imperative that consumers address this long-term risk for periods of high gas demand.
We are working with our clients to help them understand:
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