Tuesday 13 September 2016 3:14 pm

UK wholesale gas prices to spike this winter after storage closure

The UK is likely to experience supply crunches and price spikes this winter, in line with the volatility seen in 2013 when they hit multi-year highs on outages at a key European interconnector.

Fitch-owned research firm BMI said today that problems at the UK's only large gas storage site, Centrica's Rough, meant it is "likely to experience deliverability issues over the winter and is vulnerable to sharp price movements as witnessed in 2013."

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Rough meets about 10 per cent of the UK's winter peak demand and accounts for more that 70 per cent of its current gas storage capacity.

The facility permanently shut six wells at its older platform last week. The remaining 24 wells have all been temporarily shut since June for safety checks.

While Centrica expects to open 20 wells at the start of November, BMI said that this will only provide "a temporary measure of protection" given inventory levels are around half what they were last year.

BMI added that the UK is unlikely to face a sustained supply shortage due to its wide range of import alternatives, but it will become increasingly reliant on imports over the next 10 years as gas consumption outstrips North Sea production.

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UK wholesale gas prices swung to record highs at the beginning of 2013, as the temporary shut down of one of the main import pipelines coincided with a period of low gas storage levels and cold weather.

National Grid's winter outlook report released earlier this year said that it will be able to meet demand even if Rough is not fully filled this year.