The head of energy giant Centrica is urging the new government to back investment in the UK’s largest gas storage site
The UK faces a race against time to ensure it has enough gas stored for winter, a top boss has warned.
Chris O’Shea, head of British Gas owner Centrica, warned “time is running short” to ensure the country’s largest gas storage site remains open. He said the vast undersea facility, called Rough, would be “close to exhausted” by the winter, as the firm called on the government to step in.
The former gas field beneath the North Sea could store enough gas for up to 30 days but needs to be upgraded. Centrica says it is costing it £10million a month to keep it open.
It comes as growing concerns about gas supplies has sent wholesale energy prices soaring again. The wholesale price of gas in Europe has jumped 50% in the past month as countries battle for supplies against competition from the Far East due to the ongoing impact of the Middle East war.
Christoph Halser, a gas analyst at energy consultancy Rystad, told the FT: “Back in March and April we had just come out of winter and demand was pretty low. Now we are running out of time a bit as this year’s winter approaches, so the price is reacting.”
Mr O’Shea, who has spoken to new energy secretary Miatta Fahnbulleh, revealed Centrica has not put any gas into its Rough facility this summer and, by this winter, it will “be close to exhausted, producing less than 2% of what it could deliver if redeveloped.
“Rough could strengthen the UK’s energy security and reduce exposure to volatile international gas markets,” but he warned “time is running short.”
Centrica is lobbying the government to back a £2billion project to revive Rough as an enlarged storage site, Mr O’Shea calling it an “important strategic asset.” Centrica would stump up the money but says it needs guarantees when it comes to a return on its investment for decades to come.
Mr O’Shea revealed the company was talking to government about a short-term deal boost its storage for this winter in a move, he said, could help keep bills down.
“We are willing to do something short-term for this coming winter,” Mr O’Shea said. “But every day we lose is a day’s less gas we can get in there. They probably don’t want to go into this winter with less than four days of peak demand in storage capacity.”
Wholesale gas prices in the UK have also risen sharply again in recent weeks as the heatwaves have seen a rise in demand for air conditioning, especially in London.
The sweltering temperatures have also reduced output from parts of France’s nuclear power plant fleet, forcing them to rely on gas-fired power stations, further increasing demand for gas.
The UK and Europe also rely on liquefied natural gas (LNG), which arrives in supertankers, to help meet demand. However, several shipments have diverted to Asia as buyers are willing to pay a higher price.
Mr O’Shea’s comments came as Centrica revealed the company had shed 1,300 jobs in recent months, including 500 cuts announced last month as part of efforts to overhaul its customer services and support teams.
Centrica said some of the cuts involve natural attrition, whereby a person’s job is not replaced when they choose to leave or retire.
The overhaul is a response to structural changes in customer behaviour, with average customer calls falling by 20% year-on-year, and around 90% now using digital methods of support, according to Centrica.
Chief executive Chris O’Shea said: “We’re creating an awful lot of jobs, we are growing, but we’ve got to reflect the changes in customer behaviour and we’ve got to give customers what they want.
“It’s a sensitive time when people are leaving your organisation but we’re working with our trade unions and we’re working with our colleagues in order to do this in the best way possible.”
Mr O’Shea said he welcomed Andy Burnham’s decision to cut VAT from energy bills from October 1, which is set to save the typical household £45 a year. But he added: “Would I rather we had more targeted support? I would, and I suspect the Prime Minister would rather more targeted support as well.
“But that will take some time. So I think we should applaud the move to remove VAT from energy bills, but we should also give them a bit of time.”
Centrica announced a profit of £497million for the six months to June 30, compared with £549million the same time a year ago.
