Centrica Allowed to Sell Some Rough Gas: Update
(Updates with comment in para 1 & 2, removes final closure date)
UK utility Centrica has been cleared by its regulator to produce and sell some of its cushion gas at the Rough offshore storage facility in the North Sea. A spokesman told NGW September 27 that the removal of a small amount – perhaps a sixth of the total – would lower the pressure in the reservoir to a safe level. Withdrawals will begin when maintenance is over, at the start of October, he said.
This follows Centrica’s decision three months ago to shut Rough, the UK’s largest gas storage facility, permanently although it has not yet had approval to do so from the government, the spokesman said, and so the site remains a storage facility; it said at the time its intention was to produce all recoverable cushion gas from Rough, estimated at 183bn ft³ (5.18bn m³), but no time frame can be given yet.
At the same time it applied to the government for permission to close it down, subsidiary Centrica Storage which operates Rough submitted a formal application to the upstream regulator Oil and Gas Authority (OGA) to produce up to 30.7bn ft3 (868mn m3) of gas and associated liquids. This gas, normally required for the storage facility’s operation, belongs to Centrica Storage, which is ringfenced from the gas trading and supply business, and not to third party users of the Rough storage facility. Cushion gas acts as a spring, maintaining pressure in the porous rocks.
The OGA granted its consent September 26, enabling Centrica Storage to class 30.7 bn ft3 of cushion gas as working gas (equivalent to 9.463 TWh). Centrica Storage added that, because of minor differences in accounting for the volume of gas recorded in the reservoir in bn ft3 compared with kWh owing to variations in calorific value, just under 0.177 TWh extra will be included in reservoir stock. Accordingly, the company said that from September 26 it will report an increase in its stock in Rough of 9,640,390,373 kWh (9.64 TWh).
Centrica Storage told NGW that the re-classed gas will be sold and delivered this winter to the National Balancing Point (NBP) “via the usual channels, namely over-the-counter (OTC) and on exchanges.”
Asked if royalty would be payable, OGA told NGW that the cushion gas is classified as native gas from the Rough reservoir which is fully owned by Centrica. It added that royalty was abolished in 2002 so cannot apply to the sale of the cushion gas. However it added that Centrica would be liable for upstream taxes on profits from native gas production from the Rough field.
Mark Smedley