Operator Centrica Storage Ltd (CSL) (CNA.L) says that Britain’s largest natural gas storage site, Rough, will no longer be available for gas injection.
Seeing us through the Winter, with great planning, Rough gas storage was the largest gas storage facility in the UK. In the UK, the gas storage year runs from the start of May to the end of April, meaning that storage could be filled during the summer and in preparation to be used in the winter. The storage process meant that fuel prices were becoming cheaper for Rough customers.
However, concerns were rising about the integrity of wells being used at the Rough site, which is situated off England’s East coast. Last year, these worries prompted Centrica to impose limits on how much gas could be stored, these limits were used as a safety precaution. These concerns drove investigations to be carried out and Centrica initially shut the facility for injections and withdrawals of gas. In December, withdrawals resumed but injections were put on hold until July 1st. This date was then extended to the April of next year which is now indefinite.
Rough is the largest storage site in the country but is more than 30 years old and repeated outages have shown its vulnerability. It’s temporary closer last year forced gas market prices to increase, due to the UK no longer storing gas for the long term. Other storage sites in the UK, are considerably smaller in comparison to Rough, and are not part of the fuel security infrastructure but are more of an overflow facility. Therefore, the storage sites do not have the same long-term nature as Rough does.
Because of these issues, the UK market will be held to exchange rate fluctuations, as we cannot insulate ourselves by buying and shipping to store at opportune moments.
The initial closure of the Rough Site, shouldn’t have an immediate impact on the market, due to the issues and risks already being factored since last year. If the site remains closed, it will certainly play a part in the forecast costs for gas in the future.