UK’s only long-range storage site set to permanently close

Centrica announced today that it intends to permanently close Rough site, the UK's only long-term storage facility.

Centrica announced today that it intends to permanently close Rough site, the UK’s only long-term storage facility. The site has been undergoing maintenance work on and off since March 2015. The UK has been unable to inject gas into the facility since June 2016. The Rough Storage site has been operational since 1975. An assessment by Centrica over the last three months highlighted the ageing nature of the wells and facilities. The operator announced it would be unsafe and unfeasible to return them to operation.

While the news had been widely expected, there remains uncertainty over the availability of any gas left in the site. Centrica confirmed its intentions to “produce all recoverable cushion gas” from Rough, pending approval from the energy regulator Ofgem.  The volume of cushion gas in the field is estimated to be around 54 terawatt hours (TWh). As shown below, this is 15TWh higher than the maximum volume built up in previous years. However, the withdrawal rate for this gas remains unclear.  It is dependent on the length of time required for decommissioning and also the possible availability of any additional structural gas. With limited details on the use of the cushion gas, the immediate market reaction has been muted. The market had already taken into account the long-term closure of Rough. However, the gas cannot be sold until Ofgem approves its use.

The impact of any additional details on the market may be price depressive, given the unexpected volume potentially available.  Cushion gas availability means there is the possibility of the UK entering future winter seasons with higher reserves than in previous years. However, the long-term impact of this decision is variable and unclear at this time. It is dependent on a wide range of factors including temperatures, LNG availability and the supply situation in Continental Europe.

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