What now, as the Rough gas storage facility closes?
This week Centrica announced that it was to close its Rough Gas Storage facility, GB’s only seasonal gas storage facility. It began operations in 1985 and the wells and facilities have reached the end of their design life, following problems in recent years and extensive testing Centrica has decided that it cannot safely return the assets to injection and storage operations.
It said refurbishment or replacing the wells would not be economic in the current market for seasonal storage. This closure follows closure in recent years of LNG peak shaving facilities (not to be confused with LNG importation terminals.) These were at the opposite end of the storage spectrum in that they provided large quantities of gas but only for a few days with injection being spread across the while summer period. Perhaps the newer fast cycle facilities are capable of meeting both roles!
So far prices for winter 17 and 18 have barely moved, so perhaps the market was expecting this, or expecting the 5bcm of cushion gas to be produced at this time. In any event the market has already experienced a winter with limited withdrawal operations at Rough. During that time mid-range storage cycled more – literally injecting gas at times of low price / demand and withdrawing it at times of higher price / demand. Such facilities have the capability to inject or withdraw large volumes relative to the storage space on a daily basis, with rapid turnaround between flow directions.
However a particularly cold snap or longer duration cold spell may put the market under more strain and more volatility in prompt prices is likely to be seen. At such times GB will be more dependent on imports by pipeline from the EU and Norway or as LNG.
Looking for positives from the closure of Rough, three thoughts spring to mind:
- Tariff free trade with the EU just increased in importance – perhaps energy will get a higher profile in Brexit discussions
- Ensuring GB remains an attractive destination for imports may become a higher profile issue in the gas charging review
- Five billion cubic meteres of cushion gas is a welcome additional supply in to the market