UK's Rough Storage To Close for Good
The UK's largest gas storage facility Rough is to close, its operator announced June 20.
Rough's original 3.8bn m3 maximum working storage space (not including cushion gas) represented about 70% of UK storage capacity. The asset has suffered setbacks in recent years, with CSL this April saying that no more gas would be injected until April 2018 at the earliest. Now none will be.
Centrica Storage said June 20 it has completed an assessment of the offshore storage facility's commercial future, announced April 12, which involved the testing of wells, and completed a review into the feasibility of returning Rough to injection and storage operations.
"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, Centrica Storage Limited [CSL] cannot safely return the assets and facilities to injection and storage operations," it said.
From a commercial perspective, it added that its assessment of both the economics of seasonal storage today and the costs of refurbishment or rebuilding the facility and replacing the wells were such 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 183bn ft³ [5.18bn m³], the wholly-owned Centrica subsidiary stated. That volume is believed to include 'cushion gas' needed to make storage facilities run normally.
Options open to the market
Closure of the 40-year old Rough asset may possibly rekindle interest in booking transportation capacity to and from the continent, which has ample storage capacity. Interconnector UK has capacity available from September 2018 but had reported to NGW there had been thin interest in booking it.
In recent weeks, both the Oxford Institute for Energy Studies and consultancy Timera Energy have pointed to low returns for operators from running seasonal storage assets on either side of the English Channel, due to the narrow spread between winter peak and summer low prices.
Closure of the UK's largest facility however is likely to increase price volatility, particularly for UK winter gas.
One storage project whose commercial prospects may brighten as a result of Centrica's decision is the Islandmagee 0.5bn m³ scheme in Northern Ireland that is not yet under construction; its developer InfraStrata however faces a cash squeeze and the possible removal of its board next week.
Mark Smedley