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14 April 2017

Gas and Heating Prices May Spike as Centrica Closes Rough Storage Site for another Year

The Rough storage site, operated by Centrica and owned by parent company British Gas, accounts for more than 70% of the UK’s gas storage capacity. This makes it a vital component in keeping gas prices stable during the winter months, during which time it provides up to 10% of peak winter gas demand.

For this reason, coupled with the fact that gas heating is by far the most common household heating method in the UK, Centrica’s decision to keep the facility closed for another winter season could be a costly one for UK households as we are forced to rely upon pricey imports to cover demand.

The North Sea site was shut for safety checks in June 2016, and was expected to once again be fully operational by November 1st. However, it seems that the ageing facility is plagued by more problems than initially thought, and Centrica have, after repeated delays, reluctantly admitted that the facility cannot safely be used for gas storage until next April.

“The loss of Rough storage adds a significant element of risk to gas prices for the coming winter,” commented Oliver Sanderson, a gas analyst at Thomson Reuters.

“Although we do not foresee any problems in gas supply, the price at which this gas is supplied is likely to be more expensive and exposed to volatility. UK winter prices are likely to be the most expensive in Western Europe, with sharp price spikes likely during cold snaps on both sides of the Channel,” he added.

Centrica’s troubles at the Rough storage site have pushed winter gas prices up by around 40% as supply security is lessened by the continuing issues. According to the gas experts at Argus, the current wholesale price of gas sits at 46.6p/th; before the issues at Rough emerged, this price was a comparatively-low 33.375p/th.

"The market price move might have been more dramatic if not for the fact that the market was already pretty sceptical that Rough would return to normal operations for this storage year," said Matt Drinkwater, a senior gas expert at Argus.

Sam Bonson

Sam is an aspiring novelist with a passion for fantasy and crime thrillers. He is currently working as a content writer, journalist & editor in an attempt to expand his horizons.