Winter gas imports to increase as UK storage hits record low

LONDON: The UK will have to import substantial amounts of gas during the coming winter, analysts are warning, as the levels of stored gas have dropped to a record low following closure of the country's largest storage facility.

The Centrica-operated Rough storage site, located in the Southern North Sea some 30km off the coast of East Yorkshire, has been experiencing problems with its wells since March 2015. On Friday, Centrica announced it will be conducting tests at the site until April next year. As a result, the facility will be completely closed for summer. It is hoped that partial withdrawals will be possible from November.

The Rough site covers about 10 per cent of the UK's winter peak demand and makes up more than 70 per cent of the UK's current gas storage capacity. "With the UK likely to have a 1.20-1.75bcm [billion cubic metres] shortfall of gas in storage compared to last year's use (potentially an average supply shortfall of 11mcm/day), the UK gas balance will likely have to replace that volume from other sources," said Trevor Sikorski, an analyst at UK-based consultancy Energy Aspects. "It is expected that four wells (of 24 operated typically) will be opened to allow withdrawal from November. Working gas at Rough for the winter will now not exceed 1.3bcm ...this is 1.2bcm less than last winter's withdrawal."

Britain, which relies on stored gas to cover winter peak demand, will probably have to source the missing gas from European sources. "(The Rough outage) will no doubt increase the UK's dependency on gas imports and increase its exposure to European and global fundamentals," said analysts at S&P Global Platts.

Sources of additional supply include imports of liquefied natural gas (LNG), of Norwegian gas, and of gas from Europe via pipelines. Last winter, Britain's imports averaged 75 mcm/day from November to March. Wholesale gas prices have increased to a 12-month high after the Friday announcement. The analysts suggest that the prices may increase further in winter as the UK may need to pay a premium to access the gas it needs, especially if there is a cold winter.