UK’s largest natural gas storage facility to shut down without government help

The UK’s largest natural gas storage facility will be “decommissioned” without Government support, its operator Centrica has said.

British Gas owner Centrica said earlier this month that it remains in talks with ministers about government cooperation to expand and revamp its Rough facility off the coast of Yorkshire.

The facility in the North Sea is the largest of its kind in the UK, but Centrica stopped filling it with natural gas last month amid concerns over its financial viability.

The company usually starts injecting fuel into the Rough site by spring, but it had not done so by mid-April, according to reports.

Asked by the BBC’s Sunday With Laura Kuenssberg programme why Centrica needed government backing, the company’s chief executive Chris O’Shea said: “We are a big business, but this asset will lose probably £100 million this year because the cost of running it is over £100 million.

“If we were to simply spend £2 billion redeveloping this field and the summer-winter gas price stays the same, then we will lose that £2 billion and we’ll lose the cost of operating the facility.

“It’s just not sustainable.”

Mr O’Shea said the company was “not asking for any government money”.

He added: “What we’re asking for is simply for the Government to help create the conditions which will unlock £2 billion of investment and it will create thousands of jobs in the construction phase, and it will safeguard the jobs of very highly skilled colleagues.”

The Department for Energy Security and Net Zero said the future of Rough was a “commercial decision for Centrica”, but the Government remained “open to discussing proposals on gas storage sites”.

While the UK does not rely heavily on gas storage compared with other countries’ energy systems, the Rough site comprises about half of its storage capacity, and acts as a buffer when the weather is especially cold and demand for gas spikes.

Asked what would happen to the facility without government support, Mr O’Shea said: “So inevitably what will happen is that this asset will be decommissioned.

“It will be shut down, and we will remove everything that we’ve got here. We’ll make it like it was never here, and we’ll lose this resilience.”

Mr O’Shea said the site could become “the world’s single largest hydrogen storage facility”, adding that there was a “huge saving to consumers” of having the facility remain open.

The Centrica boss said Germany, France and the Netherlands had “more than 100 days of gas storage” compared to the UK’s 12 days, which would go down to six days if the Rough facility closes.

Centrica faced a shareholder revolt earlier this month over executive pay, after nearly 40% voted against its directors’ pay packets at the energy firm’s annual general meeting.

The British Gas owner has faced criticism for how much it pays chief executive Mr O’Shea in recent years.

Mr O’Shea was paid £4.3 million last year, about half of what he earned in the previous 12 months including bonuses and share-related pay.

But his annual basic salary rose 29% to £1.1 million.

Asked how he could justify the salary at a time when people were struggling to pay their energy bills, Mr O’Shea said he did not set his own pay.

He added: “Look, I think it’s really difficult. I am unbelievably fortunate.

“I have a job where the market rate is more than I ever thought I would earn.”

Mr O’Shea said the UK will have “failed” if it has a “clean energy system where people can’t afford to pay their bills”.

The Centrica chief executive added: “The energy transition is a huge economic opportunity.

“The thing that frustrates me is that we will have people that will give soundbites, but they might not be backed up by fact and you see this becoming a left versus right thing.

“What we need is an energy system which is clean, that’s resilient, and it’s always available, and it’s affordable.”

A Department for Energy Security and Net Zero spokesperson said: “As shown by the National Energy System Operator’s independent report, our mission for clean power by 2030 is achievable and will deliver a more secure energy system, which could see a lower cost of electricity and lower bills.

“The future of Rough storage is a commercial decision for Centrica, but we remain open to discussing proposals on gas storage sites, as long as it provides value for money for taxpayers.”