Rough Storage and its impact on winter gas supply and prices

In June 2016, Centrica Storage Ltd announced that their largest gas storage facility, Rough, would shut down for 42 days for urgent maintenance and inspections on all thirty of its wells. The closure was extended, with the only prediction of opening for withdrawals from the beginning of November, while injections into the storage facility would only commence once again in April 2017. 

The facility is located offshore, and is around 40 years old. After some inspections and testing, many of its wells were found to be severely damaged due to age and natural wear and tear. Rough gas storage accounts for 70% of the UK’s gas storage capacity and 10% of peak winter gas demand, therefore the UK is extremely dependent on it, especially as it remains to be our only Long Range gas provision. A full shut down on injections and withdrawals resulted in an 8% increase in winter gas prices on the day of the first announcement. Soon after some inspections had taken place, a further declaration in August followed explaining that the facility would be on shut down mode until April 2017, and from November 2016 would only have the capability to withdraw from existing gas stored.

The problem was that Rough had injected less than half of it capacity by the time it was due to close. Generally the summer months are best for injecting gas into storage, as gas demand decreases, and there is more available to store for withdrawals during winter peak demand. Having the facility on complete shut down until November did not give much time to extract and store gas. In fact, National Grid reported that:

“Due to ongoing restrictions at the Rough long-range storage facility, there will be 1.3 bcm in storage at this site at the start of winter, compared to 2.8 bcm in October 2015.” [Winter Outlook Report, page 5]

On the evening of 31st October, Centrica regrettably announced that the storage facility would be unable to begin withdrawals until the second half of November, therefore the current outage has officially been extended. Gas prices have steadily continued on their current upward track, with a small increase from 1st November due to the lack of gas available. The news that further maintenance was required came after some wells failed testing again.

The facility remains around 30% full, as injections had ceased in June restricting its level of stored gas. Rough is an aging storage facility, potentially coming towards the end of its life. Should Rough be forced to close in the future, where would the UK obtain its required level of gas, and where will be it be stored? Continued caps from Norwegian supplies continue to be implemented every year, and as a result is slowing adding pressure to the UK gas system, and prices. More news will follow in two weeks’ time.

 

 

Sources: Npower (RWE), National Grid, SSE, Gazprom Energy, Engie, OPEC, EDF Energy, Centrica Storage Ltd