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Ofgem clears path for Rough to operate until 2030

Centrica’s Rough storage facility will continue operations until at least 2030, after Ofgem extended exemptions attached to its licence.

The regulator has approved Centrica Storage Limited’s (CSL) application to extend its exemptions from negotiated third party access (nTPA).

The exemption was due to come to an end in June 2024 but has now been extended until 2030.

It comes after Centrica warned Ofgem that without an extension it would “not maintain the necessary investment now to continue to operate and repurpose Rough storage facility beyond June 2024”. Centrica also warned that this would “result in minimal gas in storage at the facility during winter 2023/2024”.

In Great Britain the default regime for natural gas storage facilities is nTPA, as set out in the Gas Act. This means that third parties have a right to access upstream infrastructure based on terms negotiated and agreed with infrastructure owners and a right to use a formal dispute resolution process where terms cannot be agreed.

However, exemptions can be granted if proposed “modification will promote security of supply” or if “the level of risk is such that the investment to construct the facility or (as the case may be) to modify the facility would not be or would not have been made without the exemption”.

Ofgem’s decision letter adds: “Since the exemption was granted, CSL has determined a preferred pathway for operations at the Rough storage facility from June 2024 onwards including expansion from current operational capacities to 50 billion cubic feet (bcf) for winter 2023/2024, early development of potential hydrogen storage, and expansion to 120 bcf of (hydrogen-ready) natural gas storage capacity from 2027/2028 onwards.”

The letter adds that the regulator considers Centrica’s plans for Rough to “be beneficial to GB security of supply and net zero”.

However, it cautions that “we may reconsider the basis for the exemption and its end date if decisions are not taken to proceed with proposed developments”.

The facility, which once accounted for around 70% of the UK’s gas storage capacity, was closed by Centrica in 2017 after a testing programme identified problems with a number of the 30 wells used to inject and withdraw gas from the Rough gas field. The firm said it was no longer commercially viable to operate the facility safely.

However, in June last year, Centrica successfully applied to North Sea Transition Authority (NSTA) for a storage licence for the Rough site to enable it to reopen the facility in response to the gas crisis.  Following engineering work over the summer, the site off the Yorkshire coast reopened in October.

Centrica posted a £3.3 billion profit for 2022 after its generation arms benefited from soaring commodity prices.

Adjusted operating profit rose 250% on the £948 million it posted in 2021 and exceeds the company’s highest profits to date – of £2.7 billion in 2012.

The British Gas owner made £1.8 billion from its oil, gas and nuclear businesses, including £339 million from the Rough gas storage site.