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Centrica drops UK Baird natural gas storage project; Caythorpe on hold

23 Sep 2013 16:10:46 | edem

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British utility Centrica has abandoned plans to develop its Baird natural gas storage project and has put its Caythorpe storage project on hold indefinitely, the company said on Monday.

The projects are the latest casualties following the UK Department of Energy and Climate Change’s (DECC’s) decision earlier this month not to introduce subsidies for new gas storage ( see ESGM 4 September 2013 ).

UK-based developer Gateway Storage has also scrapped its planned storage facility as a result of the government’s decision.

“Baird has been abandoned as the costs to maintain the option are higher than Caythorpe. We’ve retained the option to develop Caythorpe [at a later date], although for now it is in the long grass,” a Centrica Storage spokeswoman said.

The Baird project was set to be based at an existing offshore reservoir 86km from the north Norfolk coastline, and would have been developed by Centrica along with oil and gas company Perenco UK through a joint company named Bacton Storage.

The site would have had a total capacity of 3.1 billion cubic metres (bcm) when fully operational.

Caythorpe would be based onshore in Easington, near Centrica’s existing Rough asset, and would have had a capacity of 212 million cubic metres (mcm), if it is built.

“This decision was taken in light of weak economics for storage projects and the announcement by the UK Government on 4 September ruling out intervention in the market to encourage additional gas storage capacity to be built,” Centrica said.

The company has written off £240m (€285m) in investment costs as a result of the abandoned plans.

The government’s decision not to introduce subsidies has divided market opinion.

Some have suggested that a liberalised gas market should not be disrupted by subsidies, arguing that economic conditions should be the main driver for investment.

Others, however, have warned that if there are severe supply disruptions in the coming winters, the UK’s existing storage infrastructure could prove insufficient to meet demand.

Prompt prices have hit record levels at the NBP hub over the summer, with demand lifted by the need for larger-than-normal injections during the period (see separate analysis). British gas in storage was below 6% fullness and falling on 1 April 2013, compared with 60% and rising a year earlier. Jack Elliott

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