The closure of Centrica’s Rough storage facility could leave a “big hole” in the UK’s future gas supply, according to an industry analyst.
The comments came after the company announced the closure of the UK’s largest gas storage facility yesterday.
Wood Mackenzie’s European gas and power principal analyst Graham Freedman said: “From a security of supply perspective, this will give the UK government cause for concern. Historically the UK was self-sufficient in gas and had enough flexibility in its supply to meet all winter requirements.
“As a result, this left the country with limited storage of only 24 days cover compared to 105 in France and 100 in Germany. With Rough closing, this reduces UK storage cover to just 10 days, making it almost totally reliant on winter flows from the continent and LNG imports to balance daily markets.”
But he added that the closure isn’t entirely negative as there are a number of projects planned for the future, and with Brexit high on the agenda now could be the time for a change in energy policy.
Despite the concerns that the analyst has about the closure from the UK’s perspective, he said the closure made “good commercial sense” for Centrica.
The Rough site is over 30 years old, and has suffered from technical problems which make it more expensive to operate.
Freedman added: “It would have been very difficult to justify further major investment to extend Rough’s life, given continuing weak seasonal price spreads in the forward markets.”
The analyst also explained that the cushion of gas at the site has a value of over $750 million, which would return higher income than maintaining the facility, according to a discounted cash flow calculation.
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