U.K.’s Foreign Gas Dependency May Increase After Centrica Outage

  • Rough gas facility 42-day closure slowing winter stockpiling
  • U.K. may need 520 million cubic meters more gas imports

Britons may be more reliant on foreign natural gas to stay warm this winter.

An unplanned 42-day outage at the nation’s largest gas storage facility, Centrica Plc’s Rough, for testing has slowed the buildup of fuel to use for heating in winter. The U.K. may need as much as 520 million cubic meters (18 billion cubic feet) more fuel from nations including Norway and Qatar, according to an analysis by Bloomberg New Energy Finance. That’s almost 2 percent of net imports last year.

The halting of the site, which accounts for 70 percent of the U.K.’s total storage capacity and 10 percent of peak supply during winter, may affect 11 million domestic, commercial and industrial users and 40 power stations that rely on Rough-stored gas, BNEF said. Gas for winter delivery has jumped 5.6 percent since June 21, the day before the outage was announced.

“This could pose a huge winter supply issue,” BNEF analysts Meredith Annex and Het Shah said in the report published Wednesday. In a particularly cold winter “we see the U.K. running out gas stocks to meet demand.”

Source: Gas Infrastructure Europe

The storage deficit of 4 million to 7 million cubic meters a day “could be easily offset by higher than-normal withdrawals, greater reliance on interconnectors from Europe and Norway, or more LNG cargoes,” according to BNEF, which analyzed scenarios assuming a 42-day outage until Aug. 3 as well as halts of 60 days and 75 days.

If the facility is closed for as long as 75 days and temperatures are normal from October to March, the U.K. will have enough fuel, the report said. In very cold weather, the U.K. would end winter with a 10 million cubic meter shortfall assuming a 42 day outage and a 520 million deficit under the scenario of a 75 day shutdown.

Presently, Europe is in a gas supply glut, meaning other sources are readily available to fill holes in demand. Norway and Russia both recorded historic highs in gas output and exports within the last year while LNG exports from the U.S. are expected to rise.

Initially Centrica said testing on the depleted reservoir, which has been in use as a storage facility for 30 years, would start in March 2015 and take six months. The work was expanded and extended several times, taking as much as 25 percent of its capacity offline. During the testing, the company “identified an additional issue on one of the wells tested” and ceased all injection and withdrawal operations, it said last week.

In any scenario the outage limits domestic supply. Under a 75-day outage the U.K. will end the so-called injection season with 22 percent less gas in storage than a year ago, the BNEF report showed.

Gas traders, brokers and analysts surveyed by Bloomberg on the day of the Rough announcement last week had turned bullish on winter prices, citing the supply squeeze caused by the temporary halt of the facility.