UK regulator gives Centrica the go-ahead for gas storage project

UK regulator grants Centrica the go-ahead for gas storage project

UK-based energy services and solutions provider Centrica has received the green light from the UK’s regulator North Sea Transition Authority (NSTA) for a gas storage project in the Southern North Sea.  

Rough field in the North Sea; Source: Centrica

The NSTA revealed on Tuesday that it had granted the required approvals and consents to Centrica Offshore UK (COUK) for Phase 1 of the Rough gas storage site off the East Coast of England in the Southern North Sea, enabling the firm to start gas storage operations.

Back in June 2017, Centrica outlined its plan to cease operations at its ageing Rough gas storage facility due to operational issues. However, five years later while providing its interim results for the period ended 30 June 2022, Centrica explained it had started investing in the construction of “flexible distributed power generation assets, while we continue to investigate energy transition opportunities for our existing assets, including Rough and Morecambe.”

The company’s production volumes from its Rough field increased by 71 per cent to 2.4 mmboe, allowing it to continue producing during periods of higher prices, which led to an adjusted operating profit of £76 million (over $88.4 million) compared to £9 million (about $10.5 million) during the first half of 2021, “reflecting strong production from Rough and a higher achieved average gas price.”

Furthermore, Centrica confirmed that it was working on developing the option to convert Rough back to a gas storage asset, planning to ultimately turn it into a hydrogen storage asset. The UK player estimated that this project would cost in the region of £2 billion (around $2.3 billion), including the cost of converting it to store hydrogen.

“We also continue to assess longer-term options for the Spirit Energy-owned Morecambe gas field, which could prove to be an attractive asset for CCUS. Given the scale of both of these investments, we would be looking for a regulated return model for both options,” outlined Centrica.

The NSTA’s approval for the Rough gas storage project comes as a global energy crisis gathers pace with Europe facing a major gas crunch and countries around the world working to strengthen their energy security amid tighter gas supplies and higher prices due to Russia’s invasion of Ukraine.

Spurred by these events, the UK domestic gas producers have boosted their production to meet the demand, however, Offshore Energies UK (OEUK) warned a few days ago that more investment was required in oil and gas reserves to maintain production and ensure energy security.

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At the time, OEUK also highlighted that the current energy supply crisis demonstrated the challenges countries would face if oil and gas production declined more rapidly than demand, with renewable electricity generation and alternative domestic heating sources such as hydrogen not yet available at the scale needed.

This is in line with OEUK’s earlier statement urging the UK government to prioritise domestic energy production to protect consumers from supply and price shocks.