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UK's Rough gas storage unable to inject for 2017-18 storage year: CSL

London (Platts)--12 Apr 2017 942 am EDT/1342 GMT


Injection services into the UK's only long-range natural gas storage facility, Rough, will be unavailable until May 2018 at the earliest, owner- operator Centrica Storage Ltd. said Wednesday.

"CSL has concluded that...based upon the results of its well testing program, Rough cannot safely re-commence injection operations in the 2017-18 Storage Year," the company said in a statement.

CSL said the decision was made in addition to having "extensive discussions" with independent technical well advisors, with the well testing program drawing to a close after CSL established the condition of two-thirds of the wells.

"CSL will continue to conduct such further testing and analysis as it considers appropriate on a number of wells in order to allow CSL to make an assessment of the future pathway for commercial operation of the facilities," the company said.

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CSL will continue to offer withdrawal services for the 2016-17 Storage Year (May 1, 2016, to April 30, 2017), with the Rough reservoir having begun Tuesday's gas day with 387 million cu m in stock, 155 million cu m down on the year and 654 million cu m shy of the five-year average.

EUROPEAN IMPORTS


Market participants cited both imports from Continental Europe and LNG supplies as key heading towards the Winter 2017-18 delivery period to make up the loss from the Rough reservoir.

"LNG is a question mark, the key is the price spreads [between the UK and Continental Europe] for pipeline flows," said one UK-based gas trader. "The spreads will have to widen in order for the UK to get the last bits."

The ZEE/NBP Winter 17 basis was assessed at 2.10 pence/therm Tuesday -- the TTF/NBP Winter 17 basis was assessed at 3.537 p/th Tuesday.

The UK saw an increased reliance on imports through both the BBL and Interconnector pipelines last winter, importing a gross 5.24 Bcm compared to the gross 3.13 Bcm from the Winter 2015-16 delivery period, National Grid figures showed.

This was in part due to the lower gross storage withdrawals, 3.31 Bcm last winter against 4.13 Bcm in Winter 2015-16, but mostly because of weaker LNG regasification levels. LNG regas during Winter 2016-17 totaled 1.93 Bcm, a drop of 70% compared to the 6.44 Bcm from Winter 2015-16.

With little extra room for an increase in supply from both the Norwegian and UK Continental Shelves following strong flows last winter (40.41 Bcm), as with last winter, NBP Winter 17 pricing look set to track the TTF and ZEE hubs closely, with the NBP premium set to be influenced by the amount of LNG regas levels from the UK's three LNG terminals.

--Gary Hornby, gary.hornby@spglobal.com

--Edited by Jeremy Lovell, jeremy.lovell@spglobal.com

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