Britain's biggest gas storage facility faces closure unless ministers step in

Yahoo

18-05-2025

The chief executive of British Gas has warned that Britain's biggest gas storage facility will be shut down unless ministers agree to help fund the loss-making site's redevelopment.
Chris O'Shea, the chief executive of British Gas-owner Centrica, warned that the Rough facility in the North Sea, which represents half of UK's natural gas storage capacity, would be decommissioned unless the government agreed to underwrite its £2bn overhaul.
Centrica is seeking to redevelop the 40-year-old site to be able to store hydrogen alongside natural gas. The company has asked ministers for a so-called cap-and-floor mechanism to help fund the project.
While Centrica would provide the investment up front, the mechanism would effectively mean guaranteed funding underwritten by a levy on consumer bills.
Without state support, Mr O'Shea said Rough would face closure. Centrica has already stopped filling the facility off the Yorkshire coast amid concerns about the site's financial viability, prompted by a fall in wholesale gas prices.
Mr O'Shea told the BBC: 'Inevitably what will happen is this asset will be decommissioned. It will be shut down, we'll remove everything that we've got here, it will be like it was never here, and then we'll lose this resilience.'
The site, which lost £100m last year year, can hold enough gas to meet Britain's needs for six days – half the total 12 day capacity the nation has overall.
If upgraded, Rough could provide up to 30 days of supplies. If it shuts, the nation's reserves could drop to just 6 days, compared with around 100 in Germany, France and the Netherlands.
The closure of Rough would therefore raise the risk of Britain running out of gas in a crisis, threatening possible blackouts.
Gas is envisaged to comprise up to 5pc of the UK's energy demand by 2030, even under the Government's plan to shift to a clean power system by the end of the decade.
A government spokesman said: '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.'
Mr O'Shea also warned that Ed Miliband's plan to establish a clean power grid by the turn of the decade risked failing. He said achieving the 2030 target will be 'very challenging'.
The Centrica chief said: 'It's not impossible but it's not easy. I can't say, hand on heart, that we'll get there.'
While the target might be attainable 'if we all pull in the same direction,' it represented the sort of extremely ambitious goal that Centrica sometimes sets for its own people without certainty of success.
He said: 'The reality is it might not be just where we want to be by 2030. But probably by having that very stretching target we will be a lot closer than we would otherwise have been.'
Doubts over the achievability of the Government's net zero targets are adding to pressure the Energy Secretary faces to temper the pace of Britain's transition to renewables.
Analysts at consultancy Cornwall Insight warned in January that just two thirds of the solar and onshore wind power needed to achieve Mr Miliband's goal would be ready by 2030.
The Energy Secretary has already diluted other green policies, including a ban on new non-electric cars by 2030, amid a growing backlash from voters, unions and Labour MPs. Mr Miliband is also reviewing plans to erect thousands of pylons across the countryside, The Telegraph has revealed.
Mr O'Shea's warning about the risks to the 2030 target comes days after he said the shift to net zero would not cut household energy bills, despite promises from the Labour Government.
The British Gas chief wrote on LinkedIn that the shift to renewables 'will NOT materially reduce UK electricity prices from current levels'.
During last year's election campaign Mr Miliband promised that the shift to clean energy would save households £300 per year by 2030.
Speaking on the BBC's Sunday with Laura Kuenssberg programme, Mr O'Shea reiterated his concerns about such price promises. He said: 'The thing that frustrates me is that we will have people who give sound bites, but it might not be backed up by fact. You see this become a Left versus Right thing.
'New renewable development will not bring down the price. If we have a clean energy system that people can't afford to pay their bills, we will have failed.'
A government spokesman 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.'
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