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Closure of biggest UK gas storage site draws criticism

Closure of biggest UK gas storage site draws criticism

Energy trade body calls for inquiry into Centrica’s move to close Rough facility

Yesterday

A decision to close permanently the UK’s largest natural gas storage site will leave the country more dependent on imports and greater volatility in prices in winter months, an alliance of energy companies has warned.
 
The Energy & Utilities Alliance (EUA), a trade body whose members include SSE, EDF Energy and ScottishPower, is pressing for a Parliamentary inquiry into the long-term consequences of the closure of Centrica’s Rough storage site off the Yorkshire coast.Rough had been partially closed for the past year but Centrica announced in June that it would shut the site altogether, warning that the 32-year-old facility was at the end of its design life and could no longer be operated safely.
 
The British Gas-owner added that a refurbishment of Rough would “not be economic”. Rough accounts for more than 70 per cent of the UK’s gas storage capacity and could meet 10 per cent of daily peak winter demand for nearly three months. The government is so far untroubled about Centrica’s decision and says the UK has already coped without the facility during previous periods of closure.
 
Last winter, 6 per cent of gas supplies came from storage, with 42 per cent coming from Norway and 38 per cent from the North Sea, according to National Grid, which operates the UK’s electricity network and gas networks.
 
A further 10 per cent was sourced via pipelines from continental Europe and 4 per cent was met by liquefied natural gas, which is shipped to the UK from locations such as Qatar. National Grid believes there will be sufficient gas available from such diverse sources to meet demand in the forthcoming winter.
 
But some organisations are concerned that there is a complacency in Whitehall about the longer-term ramifications of the loss of a strategically important asset that provided a crucial supply buffer during winter months.
 
The EUA points out that recent winters have been mild and therefore the market has not so far come under particular strain when Rough was unavailable. It is concerned the UK could be left exposed if a pipeline went down unexpectedly or if LNG shipments were disrupted. 
 
“The closure of Britain’s largest storage site for natural gas gets rid of a vital supply buffer which allowed us to reduce reliance on gas imports,” said Mike Foster, the alliance’s chief executive. “This almost certainly means greater volatility for gas prices this winter.
 
”SSE, the FTSE 100 energy company that owns two other gas storage sites in the UK, said the economics of operating such facilities are “extremely challenging” and will only increase. “SSE would echo the calls for some clarity on the future role of gas storage and recognition of its importance in the UK energy market,” the company said.
 
“The UK has less available gas storage than many neighbouring countries and gas storage facilities can play a vital role in the country’s stability of price and security of supply in the event of gas supply variations.
 
”The Department for Business, Energy and Industrial Strategy said: “The UK has highly diverse and flexible sources of gas supply through domestic production and extensive import capability, protecting our supply and keeping prices down.
 
“The decision to close Rough will not have a material bearing on current UK gas prices because it was widely anticipated by the market given its ageing infrastructure.”
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