Engineering news
Centrica's Easington terminal processes gas from the Rough storage facility off the coast of East Yorkshire
British Gas owner Centrica has shelved plans to build two gas storage projects in East Yorkshire and the North Sea at a cost of £240 million. The company has blamed the government's decision not to subsidise new gas storage for the move, which could leave the country increasingly reliant on imported gas.
Centrica said the storage projects had “weak economics” and it would not proceed with its planned £1.5 billion conversion of Baird depleted gas field in the southern North Sea, off the North Norfolk coast.
The project was expected to create capacity to store 108 billion cubic feet of gas - enough to meet 13.5 days of peak demand. It would have become Britain's second-biggest gas storage site behind Centrica's Rough facility off the coast of East Yorkshire, which can store 118 billion cubic feet of gas.
The company also put on hold indefinitely a smaller project to convert a depleted gas field at Caythorpe in East Yorkshire into a "fast-cycle" storage facility. The project, which had a price tag of more than £100 million, would have held up to 7.5 billion cubic feet of gas to rapidly meet demand spikes.
The UK has less than three weeks of gas storage supply, much less than Germany and France, which is used to help meet demand spikes during cold weather. In March the prolonged cold spell saw Britain's stored gas supplies fall dangerously low, with warnings of supply interruptions.
The Department of Energy and Climate Change (DECC) ruled out subsidising investment in new gas storage earlier this month, saying it was unfair for the burden to fall on taxpayers. Energy minister Michael Fallon said the decision would save consumers £750 million over a decade.
Centrica said: "We believe there's still a need for new gas storage capacity in the UK but unfortunately market conditions now do not make that investment possible for us."
The projects relied on being able to buy gas cheaply in the summer when demand is low, and selling it for a profit during the winter when demand soars.
A House of Commons report in 2011 said the UK needs to "significantly increase" its gas storage capacity and warned that doing nothing could diminish energy security.
DECC insisted the market can provide new gas storage capacity without subsidy, citing two new storage facilities in Yorkshire and Cheshire which opened during the past year. It added two more storage sites in Cheshire are being built and are due to be completed in early 2014.