British Gas owner Centrica has expanded the UK’s largest gas storage facility in the North Sea, and called for changes in the investment regime for it to bring the site back to full capacity again.
The energy titan announced it has doubled its current Rough capacity of 30bn cubic feet (bcf) to 54bcf – raising its storage levels from 20 to 36 per cent of its full potential.
However, the oil and gas giant also warned it will not be able to restore the site to its original capacity of 150bn bcf – without spending billions more restoring the site.
This includes re-drilling wells and making it net-zero ready, with Centrica hoping to later repurpose Rough as the world’s largest low-carbon hydrogen storage facility.
Centrica’s chief executive Chris O’Shea said: “We stand ready to invest £2bn to repurpose the Rough field into the world’s biggest methane and hydrogen storage facility, bolstering the UK’s energy security, delivering a net zero electricity system by 2035, creating 5,000 skilled jobs and decarbonising the UK’s industrial clusters by 2040.
“But to do this we need the right regulatory support framework. “
City A.M. understands O’Shea wants the regulators to introduce a cap and floor model for the site, which would establish a yearly maximum and minimum level for revenues over a long-term contract.
Top-up payments would be paid to the licensee if revenues are lower than the floor, and similarly, the licensee would pay revenues in excess of the cap to consumers.
This would be in line with the funding model National Grid has negotiated with market watchdog Ofgem for trading electricity and gas with interconnectors.
The FTSE 100 company made £3.3bn profit last year, powered by soaring oil and gas prices following Russia’s invasion of Ukraine.
The government and Ofgem has been approached for comment.
Rough lies 18 miles off the coast of East Yorkshire, and was the UK’s largest gas storage site for decades – before it was wound down in 2017 after the government declined to support Centrica with taxpayer funds to keep the site open.
Following negotiations with Whitehall, Centrica re-opened Rough for gas storage in October 2022 – but at a much reduced capacity.
Nevertheless, Rough now provides half of the UK’s total gas storage – bringing the country’s total reserves to 12 days.
By contrast, Germany has reserves of 90 days, France has 103 days and the Netherlands has 123 days’ worth of gas.
The UK instead relies on connections with Norway and other European countries alongside its three liquefied natural gas import terminals.