Winter Gas in U.K. Jumps as Largest Storage Site Extends Outageby and
Centrica Rough storage unit 42-day outage extended until Nov.
Winter 2016 gas jumps most on record, front-month gas plunges
U.K. gas for winter delivery soared the most on record after the operator of the country’s largest storage facility said it will be completely out of service until at least November.
The full closure of the facility, called Rough, is an extension of an outage started June 22 that has already sapped demand in the U.K. In summer, traders and utilities stockpile gas for winter, when heating fuel is needed. Britain now has about 35 percent less gas in storage than the five-year average.
Gas for delivery in winter, the six months from March, jumped a record 11 percent on the ICE Futures Europe exchange in London. U.K. winter power rose as much as a record 11 percent, according to broker data compiled by Bloomberg.
“It certainly eliminates Rough as a source of supply for the winter so they’re going to have to scramble for other supplies,” Zach Allen, president of Pan Eurasian Enterprises said by telephone from Perryville, Rhode Island. “That’s why prices went up.”
Weaker short-term demand because of the suspension of injections into Rough has pressured front-month prices. Gas for delivery in August reversed a gain on Friday, falling for a sixth day to 33.35 pence a therm ($4.40), the longest run of declines since March.
Works to repair and check the reliability of the Rough gas facility began in March 2015 and were expected to last six months. They’ve been expanded and extended several times and in June operator Centrica Plc said it would fully close the facility for 42 days after discovering an unnamed issue in one of its wells.
On Friday, Centrica Storage Ltd. said in a notice on its website that while the well has been plugged it needs to carry out an extended seal-testing program that will probably last until March or April 2017.
“The affected well has identified potential uncertainties in the remaining untested wells,” it said. “We estimate completion in March to April 2017. In the meantime because of the uncertainty as a prudent and safe operator CSL cannot inject or withdraw gas from Rough.”
Four wells in the facility, which can hold 70 percent of the U.K.’s storage capacity and of meeting 10 percent of daily peak winter demand, may return to service in November in time to supply gas for the coldest months of the year. Centrica plans to finish a study on how much of the storage facility can be used this winter by Oct. 30.
The U.K. is able to store about 4.5 billion cubic meters (160 billion cubic feet) of gas, equal to about 6 percent of its gas use in 2014, according to data from Eurogas. That compares with more than 30 percent in Germany, France and the Netherlands. Britain needs less storage than other European nations because of its diverse supplies, according to National Grid Plc, the nation’s network operator.