Centrica has won approval to reduce the minimum capacity of the UK’s biggest gas storage facility to zero.
The go-ahead by UK energy regulator Ofgem applies to the 2017/18 storage year. Safety concerns about the integrity of wells at the facility off the UK’s east coast prompted Centrica to impose limits last year on how much gas could be stored there. The company subsequently announced in February that because of well testing the site would not be available for gas injection until July 1st at the earliest.
Reduced operations at Rough were blamed for Centrica’s storage division posting its first ever loss last month. A report on the commercial viability of the site is due by the end of June.
Problems at Rough put upward pressure on UK gas prices this (and next) winter, and downward pressure in summer, as there is less demand for storage injection. Rough makes up 70% of the UK's total storage.
The reduction in capacity comes at a time when a convergence of summer and winter prices across Europe has put downward pressure on European gas storage margins – although there was some relief this past winter as very cold weather pushed up prompt winter prices. Around 5% of Europe’s gas storage capacity has already been closed this decade and utilities look likely to shut further facilities because of worsening gas price spreads.