What is the future for gas storage in the United Kingdom?

By Chinwe E. Ezeigbo, Project Director- Europe (The Mix: O & W)

Summary of the Energy Institute evening lecture held in London on the 22^nd of March, 2012. The presentation was given by Dr Andrew Knights, Petroleum Services Group, Deloitte.

Natural gas storage has been described as an “insurance”[1] against unforeseen circumstances that hamper the production of gas. The concept of gas storage is aimed at bridging the gap between supply of gas and the demand for it. Ideally gas which is produced and not used during summer is stored for use during the winter period to meet the increased demand for it at that period. The demand chain for gas is an inconsistent chain and is characterised by wild imbalances. Gas storage helps in the management of the gas supply chain[2]. This is because gas storage serves as an instrument for balancing the gap between supply and demand in the gas market[3]  . Gas storage is used as an alternative to other supplies of gas.

Gas storage is a very important and interesting topic especially with the developments in the unconventional gas industry which result in the oversupply of gas and make the markets more self-sufficient. Dr Andrew Knights started his presentation by giving details of some recent highlights with respect to gas storage in Great Britain which among others include the termination of the Bains gas storage project by Centrica early last month February[4], BP Gas marketing acquiring 50.495% equity stake at the Northern Irish storage facility called Islandmagee Storage Ltd early this year[5] and the claims by various gas companies in the UK, in early January, of the Crown Estate damaging UK storage project hopes and thus hampering British security of supply by setting rental rates that make the building of gas storage sites uneconomic[6].

From 2009-2010, statistics showed that the maximum deliverability of gas without storage was held to be approximately 500 mscm/d, the peak supply (ex-storage) was between 300 – 400 mscm/d and the peak day demand (sources ex-storage) declines as figures show that as at January 2010 was 468 mscm/d, at December 2010 was 464 mscm/d, and at February 2012 the peak day demand was 416.56 mscm/d[7]. Dr knights predictions for the GB gas transmission future resulting from the figures stated above, show that there would be a slow reduction in annual demand of gas and a significant increase in the dependence on imported gas. The summary of the analysis of the statistics of the gas storage volumes from 2005 to 2012 show that storage volumes have increased by a slight capacity from 4bcm in 2005 to 4.6bcm in 2011 and that 2012 storage levels have been shown to be the highest in five years.

In the UK there are several storage facilities in different locations operated by different energy companies. They are:

1. Rough (Centrica)
2. Hornsea (SSE)
3. Humbly Grove (Star Energy)
4. Hatfed Moor (Scottish Power)
5. Holehouse Farm (EDF Trading)
6. Aldbrough 1 ( SSE/Statoil)
7. LNG Storage (National Grid)

Altogether these projects occupy a space capacity of 4.4bcm. Some other gas storage projects are still under development and five other projects are still awaiting planning permission from the Crown Estate.

As stated above, gas is stored for various purposes, ranging from the need to ensure security and flexibility of supply, for annual seasonal supply/demand balance and for anticipated the support of wind power as a source of energy. With regards to flexibility of supply, from the statistics available, Dr Knights reckons that the level of supply available highlights that the current level of storage levels are adequate. As at 2010/2011, the storage support was analysed to last for 44 days. He also suggested when forecasting the flexibility of supply for the year 2020/2021, gas storage may be used only for operational purposes but this depends on the availability of imported gas. To provide a support for storage a minimum available volume of 8.1bcm would be required and this means that in the event of a failure of imported gas for 30 days, 8.5bcm of gas would be required.

Statistics show that by 2020, up to 25,000MW of wind power may be installed. This is equivalent to 90-130 mscm/d of gas fired power stations. Energy supplied from wind power is estimated to last for 5000hours/year offshore and 2000 hours/year onshore. As such energy from gas fired generation would be used to fill any shortages encountered by the use of wind power.

Dr Knight concluded the lecture by stating that “…Under normal operational conditions with the level of import infrastructure provisions, it is considered possible that no additional gas storage would be required (in Great Britain) for 20/21, but this (conclusion) does not consider the risk of failure of imported gas or the backup requirement for wind power”.

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[1] BERR, Business Enterprise and Regulatory Reform ,Digest of UK Energy Statistics (DUKE 2008), available at http://www.berr.gov.uk/energy/statistics/publications/dukes/page45537.html,

[2] Plaat, H., Underground storage: why and how., 25, in Evans, D.J., and Chadwick R.A (eds): Underground gas storage: worldwide experiences and future development in the UK and Europe, (London: The Geological society, Special publication, 2009)

[3] Ezeigbo C.E., Gas storage: A reliable mechanism for ensuring security of supply in the UK? 9 (CEPMLP research paper, Dundee, 2011)

[4] For further information see http://uk.reuters.com/article/2012/02/23/uk-britain-centrica-storage-idUKTRE81M0WY20120223 and http://www.icis.com/heren/articles/2012/02/23/9535387/gas/esgm/centrica-terminates-bains-natural-gas-storage-project.html

[5] See http://www.stockmarketwire.com/article/4294617/BP-Gas-Marketing-acquires-equity-option-in-Islandmagee.html

[6] See http://www.downstreamtoday.com/news/article.aspx?a_id=35384&AspxAutoDetectCookieSupport=1

[7] Data source: NTS 2011 ten year plan