UK Storage Project Pleads for Gov't Action (Update with Cost)
The original January 29 article has been updated on January 30 with remarks by the project company about the project's estimated cost and timeline, which are included in italics.
The developers of the Gateway Gas Storage project have called for UK government action on gas security, as the project enters into a new agreement for lease with UK’s Crown Estate.
The agreement covers rights in the UK East Irish Sea to develop a 1.5bn m3 subsea salt cavern gas storage facility. Backed by the Lundin Group and Stag Energy, Gateway secured a storage licence in 2010 and says that, if developed, its project -- 25km offshore, south west of Barrow-in-Furness -- could increase UK gas storage capacity by nearly 30%.
Gateway and Stag Energy director George Grant said: “We are pleased to have agreed terms to extend Gateway’s rights in the East Irish Sea. However, we remain concerned that successive governments have brushed the issue of gas security under the carpet, particularly in light of Centrica’s announcement of the closure of its Rough storage facility.” UK regulators last month approved the closure of Rough which, with 3.3bn m3 of working storage, represents about 75% of UK storage capacity in volume terms; the closure is expected later this year.
Meanwhile there are doubts whether the 0.5bn m3 Islandmagee storage project onshore Northern Ireland can get vital EU funding.
Citing remarks by junior UK oil and gas minister Richard Harrington in mid-November 2017 about the need for a “diverse and competitive range of supply sources” to protect against damaging spikes in both gas and electricity prices, Gateway’s Grant said: “Without an appropriate regulatory framework, as is in place in many continental markets, UK consumers are in danger of becoming irresponsibly exposed to the volatilities in international gas markets with little ability for the domestic market to provide insurance against international price rises.”
Gateway said construction of its project would lead to a significant investment in northwest England and creation of hundreds of jobs. It estimates project cost at £700mn to £800mn, plus about £200mn to purchase the cushion gas required to make the facility work. So that's a total of up to £1bn ($1.4bn) for a proposed total of 1.5bn m3 working gas capacity, for which around 15 caverns would be required.
The Gateway project says it completed its front end engineering design (Feed) some time ago and has been waiting for market conditions or an appropriate regulatory framework to progress further. When such conditions occur, it says it would require about one year to refresh FEED assumptions and to tender the key work packages for the project. It would then take five to six years for the caverns to be developed and the project to reach full commercial operations.
Gateway says its site has the maximum potential to deliver around 3bn m3 of working gas, so twice its maximum design capacity, if there were sufficient demand.
The company has cited National Grid’s ‘Future Energy Scenarios’ report of July 2017 which highlighted the possibility of gas supply shortages in the UK as early as 2021.
Government thinking is that the UK is connected to several sources of gas, ranging from the continent to LNG, and that gas storage can even be procured in mainland Europe to safeguard UK gas security. However a UK House of Lords report, published January 29, warned that the UK's decision to leave the European Union puts its energy trade with the EU at risk of higher prices and lower supply security.