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Minister rejects boost to gas storage despite threat of shortages

Luke Pollard
Luke Pollard said Centrica 'can choose their investments that they want to make' - PA/James Manning

A minister has rejected calls to invest in Britain's largest gas storage facility despite growing fears of winter fuel shortages .

Luke Pollard, the defence minister, said that the emergency gas storage facility, known as Rough, "is not something that the Government is choosing to invest in".

Rough, which is located in the North Sea and operated by British Gas owner Centrica, represents about half of Britain's gas storage capacity.

Bosses at Centrica have warned the facility could close by April 2027 unless the site receives government support, leaving a major gap in the nation's energy reserves.

Speaking to BBC Radio 4's Today programme, Mr Pollard said: "Centrica are a big company with deep pockets. They can choose their investments that they want to make."

He added: "This is a very clear commercial decision for the company.

"The steps that we're taking as a Government are to come off the fossil fuel roller-coaster with more investment in renewables."

He made the comments after Chris O'Shea, Centrica's chief executive, warned that the loss-making facility was needed to safeguard national security .

Centrica has been in talks with ministers for a cap-and-floor mechanism to help fund a £2bn injection into the gas facility.

The FTSE 100 company would supply the investment up front, but the scheme would effectively mean guaranteed funding underwritten by a levy on household energy bills.

Mr O'Shea said: "The future of Rough is too important to the UK to be dismissed as simply a 'commercial decision'.

"The UK's energy security cannot be taken for granted, and Rough is an opportunity to strengthen our national security and resilience, safeguard existing jobs, create new ones and drive investment and growth in the UK – delivering on the Government's own ambition to reindustrialise Britain."

He said the FTSE 100 company was not asking taxpayers to fund the investment, but was instead "asking for the Government to apply its existing cap-and-floor regulatory framework to unlock it".

Mr O'Shea added: "We are ready to invest £2bn of our own money in critical national infrastructure. Government should not allow this opportunity to be lost."

The Government has yet to make a formal decision on the future of Rough and a spokesman declined to comment.

The UK, along with other European countries, is going into winter with some of the lowest levels of gas storage in years .

Supplies from the Middle East remain disrupted because of the Iran war and damage to liquefied natural gas infrastructure across the Gulf.

The wholesale price of European gas rose to its highest level in four years on Tuesday at nearly €87 per megawatt hour after increasing for six consecutive days.

Gas prices were around €32 per megawatt hour before the Iran war started.

Tancrede Fulop, an analyst at Morningstar, said higher gas prices were being driven by "unusually low storage levels for this time of year as the heating season begins".

He added: "Supply disruptions in the Gulf have also intensified competition with Asian buyers for US LNG."

A report released last week by the European Network of Transmission System Operators for Gas found that the UK's gas storage facilities could be completely depleted by spring if a cold snap sweeps across the country.

Warnings about low energy reserves come as pressure grows on Andy Burnham to approve the Jackdaw and Rosebank gas and oil fields .

However, objections from environmental groups have meant the Government has repeatedly delayed the decision.

Separately, shares in BP climbed to a six-month high on Tuesday after the energy giant revealed it had been able to cut its debt pile by a third thanks to soaring oil and gas prices.

The FTSE 100 business said its net debt would fall to below $14.5bn (£10.9bn) in the third quarter, down from $22.3bn.

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