Centrica faces a £240million write-off after scrapping plans to develop its new North Sea gas storage project.
The Baird project, which was planned for the Southern North Sea off Norfolk, would have seen an empty gas field being used to store supplies.
It planned to pump gas into the field while costs were cheaper in the summer. The gas could then be extracted and sold for a profit during the winter when prices are higher.
The project had already been on hold since 2011, but today the energy giant confirmed it would not be progressing with the scheme, and was also shelving plans for an onshore storage project in the empty Caythorpe field in Yorkshire.
The two projects were worth a total of £1.5billion, with Centrica admitting it would take a £240million hit in its next results.
“Centrica has taken the decision not to proceed with its new-build gas storage project at Baird in the UK Southern North Sea and to put its project at Caythorpe in East Yorkshire on hold indefinitely,” the company confirmed.
“This decision was taken in light of weak economics for storage projects and the announcement by the UK Government on 4 September ruling out intervention in the market to encourage additional gas storage capacity to be built.
“As a result of this decision, Centrica will write off all costs incurred and committed on these projects and expects to recognise impairments and provisions totalling approximately £240 million as an exceptional cost in the Group’s 2013 preliminary financial results.”
The move increases concerns about the UK’s energy security, with less than three weeks of gas storage supply.
Centrica already operates the Rough gas storage field, off the Yorkshire coast, which is already capable of meeting around 10% of UK peak demand. The company says it can meet 15 days of peak demand at Rough – around 75% of the storage capacity.
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