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Centrica suspends Rough injections beyond 1 May: Update

16 Feb 2017 17:26 GMT
Centrica suspends Rough injections beyond 1 May: Update

Adds further detail to second, third and fourth sections

London, 16 February (Argus) — UK utility Centrica has suspended injections at its troubled Rough seasonal gas storage facility, likely until 1 July and potentially for longer.

"CSL… cannot safely return to injection operations on or prior to 1 May 2017", and "cannot offer injection services for the storage season 2017-18 at the present time" the operator said.

Centrica expects to conclude its well-testing programme on schedule by 30 April, but the firm expects to complete its analysis of the test data by the end of June. The operator will then make an announcement on any further works that may be required to restore injection capacity at the facility.

Withdrawals from the facility will remain possible during this period, but no injections will be allowed.

Of the 12 wells at Rough that have undergone pressure testing, six have failed, Centrica said earlier this month.

Early summer pressure

The suspension of injections until potentially 1 July could leave the UK with more supply available for export to the continent through the Interconnector or to add to mid-range storage in May-June.

Continental demand could be high this summer with stocks across northwest Europe on track to be considerably lower than average by the end of the winter. Brisk UK exports would help the Netherlands, France and Germany meet strong injection demand.

With no Rough injections in the second half of June, the UK could have large amounts of gas to inject into mid-range sites. Annual Interconnector maintenance is scheduled for the 14-28 June gas days and any spare supply in those two weeks would have to be injected into mid-range storage as it will not be possible to offload it to the continent.

Third-quarter support

But the return of some wells to injection operations by 1 July could result in a strong stockbuild for the remainder of the summer and potentially into the fourth quarter, depending on how much capacity Centrica makes available.

A quick mid-range stockbuild in May-June could offset some of the third-quarter Rough injection demand and injection capacity will partly depend on the number of wells that pass the pressure testing.

But under the 12 and 16 wells returning scenarios that Centrica detailed in mid-December withdrawal capacity is expected to be cut more than injection capacity with fewer wells. If Centrica also offers within-year injection capacity maximum injections rates may not be that much lower than in recent years.

Centrica had proposed offering 17.8TWh — including standard bundled units (SBUs), additional space and operating stocks — if 12 wells return to service and 21.6TWh if 16 wells return.

Injections in July-October — taking into account Rough maintenance on the 2-20 September gas days — would have to be 173 GWh/d to fill the proposed offered capacity for the 12 wells scenario and 210 GWh/d for the 16 wells scenario.

If within-year injection capacity is offered there would be ample technical injection capacity to fill the proposed space in the 12 and 16 wells operating scenarios, based on the daily injection profiles Centrica had previously detailed.

But the return of injection capacity could be pushed back further, resulting in a more concentrated stockbuild and reducing the chance that the previously proposed capacity offerings could be filled.

And there is uncertainty about how much space would be available for the coming storage year. The later expected return to injections may lower the chance that Centrica could offer any further additional space.

Further delays

Further delays to Rough injection capacity could result in a very short period for injections ahead of the coming winter, or the site not being available for the 2017-18 storage year.

Lower Rough stocks for the 2017-18 winter would make the UK more dependent on imports from the continent to meet consumption.

Inventories were below average this winter because injection capacity was halted in late June as a result of the well integrity issues, which along with slow LNG imports and cold weather has boosted Interconnector deliveries to the UK in recent months.