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Scramble to reopen Rough natural gas storage site

Rough gas UK - Simon Price
Rough gas UK - Simon Price

Britain's largest natural gas storage facility is to be reopened within months to help ease the energy crisis under plans being discussed with Kwasi Kwarteng.

The mothballed Rough site under the North Sea could start receiving gas again before the onset of winter after its owner Centrica began talks with Mr Kwarteng, the Business Secretary.

Restarting the site would allow Britain to store ten days of gas supply off the coast of east England, and would cost roughly £2bn.

Ministers are preparing for what is expected to be a difficult winter, amid fears that tensions between Russia and Europe over the war in Ukraine could prompt Moscow to switch off gas supplies to the Continent.

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Rough has not been used for storage since 2017 but Centrica, the parent company of British Gas, has argued that it can be up and running again in a matter of months.

Talks are said to have been constructive so far but a key sticking point is how the scheme will be paid for, with the company claiming it will only be viable with state support.

It comes after Whitehall planners warned there could be gas shortages next winter in a “reasonable worst case scenario” where Vladimir Putin cuts off Russian flows to Europe.

Under one modelled scenario first reported by the Times, electricity would need to be rationed to 6m homes in the morning and evenings.

Experts and Downing Street on Monday insisted that gas shortages next winter remained a highly unlikely scenario.

Nevertheless, reopening Rough is one of several options ministers are considering to strengthen Britain’s energy supplies, as concerns grow that Russia could seek to weaponise Europe’s dependency on gas as the Ukraine conflict drags on.

As part of those efforts, Mr Kwarteng has already written to the operators of the country’s last remaining coal power stations and told the National Grid to seek more generating capacity from non-gas sources.

The Business Secretary also suggested he was open to extending the lifetime of the Hinkley Point B nuclear power station beyond its scheduled closure this summer, but in a blow to those hopes EDF, the plant’s owner, said it was too late.

An EDF spokesman said that while an extension is technically feasible, there is not enough time to carry out the necessary safety measures and secure regulatory approval in time for winter.

One Whitehall source suggested that the case for Rough had also been bolstered by the recent glut of liquified natural gas (LNG) flowing into Britain’s terminals.

So much has arrived that prices have fallen and ships have been turned away, with export pipes to Europe working flat out and nowhere else for it to be stored.

They added: “If we had more gas storage, that would not be a problem."

Centrica is understood to be confident it could secure investment needed to reopen Rough but only if the Government agrees to provide regulatory support, possibly through a “cap and floor” mechanism that would ensure a minimum return on the company’s investment.

In the past Chris O’Shea, Centrica’s chief executive, has also suggested that a big chunk of the costs could be paid for by consumers through their bills, under what is known as the regulated asset base model.

The company says that Rough could initially be used for storing natural gas before eventually being repurposed for a blend of gas and hydrogen, or hydrogen alone in future.

The company shut Rough in 2017 because it had become too expensive to maintain without state support.

Previously, the facility had accounted for 70pc of Britain’s natural gas storage capacity.

Tom Edwards, a senior modeller at Cornwall Insight, said having backup supplies at Rough could provide a source of extra gas to the market during the winter months, making it less vulnerable to sudden price swings.

He added: “Having that flexibility on your own doorstep is useful. It's an insurance policy, because it gives you the seasonal flexibility to cope with unexpected changes in demand and supply.”

The Government has also held separate talks about reviving plans to store gas in vast salt caverns under the Irish Sea, although these are understood to be a lower priority because the scheme, called the Gateway project, must be built from scratch.

It would involve using caves south-west of Barrow-in-Furness to store 1.5bn cubic metres of natural gas or hydrogen, according to Stag Energy.