LONDON—Britain is set to lose its largest natural gas storage site, increasing the country's reliance on imported energy, after British Gas owner Centrica said it would close its aging Rough facility.
Wholesale gas prices will become more volatile and more vulnerable to price spikes, analysts and traders said.
Britain already imports about half of its gas from Norway, continental Europe and from Qatar in the form of LNG.
This figure is expected to rise as its own supplies from the UK Continental Shelf decline.
And if Britain cannot call on stored reserves when demand rises in winter, it will need to import even more. Rough covered one-tenth of Britain’s peak winter demand.
“The loss of Rough will create uncertainty, volatility and leave (Britain) exposed,” said Wayne Bryan, an analyst at consultancy Alfa Energy.
“If we experience a two-to-three week cold snap, the loss of Rough will see us reliant on imports, namely LNG,” Bryan said.
Storage provides security and flexibility of supply. Gas injected in the summer at times of low demand and low prices is there to meet demand when consumption rises in the winter.
With the closure of Rough, Britain loses about 70% of its storage capacity.
“The market will be more exposed to international price fluctuations as more imports will be required to balance Britain’s gas market when cold,” said Katrina Oldham, an energy trader at Inenco.
Reflecting the British market’s vulnerability to imports, prices for July gas jumped earlier this month after doubts were raised about delivery of two Qatari LNG cargoes.
The two tankers eventually declared they would come to Britain, but via a different route, sending prices back down.
Recommended Reading
Deep Well Services, CNX Launch JV AutoSep Technologies
2024-04-25 - AutoSep Technologies, a joint venture between Deep Well Services and CNX Resources, will provide automated conventional flowback operations to the oil and gas industry.
EQT Sees Clear Path to $5B in Potential Divestments
2024-04-24 - EQT Corp. executives said that an April deal with Equinor has been a catalyst for talks with potential buyers as the company looks to shed debt for its Equitrans Midstream acquisition.
Matador Hoards Dry Powder for Potential M&A, Adds Delaware Acreage
2024-04-24 - Delaware-focused E&P Matador Resources is growing oil production, expanding midstream capacity, keeping debt low and hunting for M&A opportunities.
TotalEnergies, Vanguard Renewables Form RNG JV in US
2024-04-24 - Total Energies and Vanguard Renewable’s equally owned joint venture initially aims to advance 10 RNG projects into construction during the next 12 months.
Ithaca Energy to Buy Eni's UK Assets in $938MM North Sea Deal
2024-04-23 - Eni, one of Italy's biggest energy companies, will transfer its U.K. business in exchange for 38.5% of Ithaca's share capital, while the existing Ithaca Energy shareholders will own the remaining 61.5% of the combined group.