Wholesale energy prices in Europe have had a new three-year high, just as the UK’s most critical has storage site is all-but empty
The boss of British Gas owner Centrica has revealed a storage site critical for the UK’s winter energy needs is “practically empty” – raising the threat of higher bills.
Chris O’Shea ramped up pressure on the government to back its plans for £2billion of investment in its Rough facility, beneath the North Sea. The former gas field could store enough gas for up to 30 days, but needs to be upgraded.
Sources say Rough has no gas stored in at now, and that Centrica hasn’t pumped any into it this year. It only contains so-called “native” gas, or what has always been there, and there is very little of that left too. The facility only has a production licence until next April, meaning it will not be allowed to extract even the native gas after that point.
Writing in The Times, Mr O’Shea said: “Rough, in the North Sea, is the UK’s only large-scale gas storage facility. Yet it is practically empty, as markets currently do not make it financially viable.
“Storage is an insurance policy against supply disruption and price spikes. But if the government chooses not to include Rough in its existing regulatory support model, it will remain empty over the winter and close by spring, losing hundreds of unionised, well-paid jobs.”
His warnings come as European wholesale gas prices hit a three year high, driven by fresh missile strikes in the Middle East. The UK has traditionally had much lower levels of stored gas because it has been able to rely on North Sea supplies.
However, with that source of gas now reducing, and controversy over new North Sea drilling, the country has been forced to call on ever more imports. Yet those routes are under pressure because the Iran war – and the blockade of the Strait of Hormuz – has meant Europe’s gas storage levels are also lower than usual ahead of winter.
Gas storage sites across the EU were 65% full at the start of this month, down from a five-year average of 82% at the same date. To make matters worse, the Middle East conflict has seen a growing clamour for shipments of liquefied natural gas, especially from Asia.
The rise in wholesale gas prices increases the prospect of further energy bill hikes for households in, who already face an average £60 increase in their annual bill from October after a rise in regulator Ofgem’s price cap to £1,723 a year, a three-year high.