The developers of the Gateway Gas Storage project in the U.K. are urging Government action on gas security as the project enters into a new agreement for lease with The Crown Estate. The agreement covers offshore rights in the East Irish Sea for the development of a 1.5 bcm salt cavern gas storage facility.

The Gateway gas storage project is supported by the Lundin Group and Stag Energy, who were instrumental in working with Government to create legislation suitable to support the development of Carbon Capture & Storage, Offshore LNG and Offshore Gas Storage (Energy Act 2008), and secured the first Offshore Gas Storage License in 2010 for the Gateway project.

Gateway was one of several industry and trade union signatories to an Open Letter sent to Ministers Greg Clark MP and Richard Harrington MP at the Department of Business, Energy & Industrial Strategy on 15 November 2017.

The letter called for an urgent inquiry into the risks to gas security of supply with particular reference to the need for the U.K. to maintain a minimum level of gas storage in order to mitigate gas and electricity price volatility. Given the U.K.’s growing dependency on imported gas supplies, there is a need to ensure some level of price protection for industrial and residential consumers.

Director of Gateway and Stag Energy, George Grant said: “We are pleased to have agreed terms to extend Gateway’s rights in the East Irish Sea. However, we remain concerned that successive Governments have brushed the issue of gas security under the carpet, particularly in light of Centrica’s recent announcement of the closure of the Rough storage facility”

Cost-effective security of energy supplies must be at the heart of the Government’s energy policy with gas/energy price security, i.e. the impact and frequency of short term price spikes, being the critical issue. Of the three sources of gas security (Domestic Production, Imports (Pipeline & LNG) and Storage) capacity from Domestic Production and Storage have declined dramatically in recent years.

The Minister has highlighted in his response to the letter of 15 November that there is a need for a “diverse and competitive range of supply sources” to protect against damaging spikes in both gas and electricity prices. Gas storage is an important element of the supply mix that provides insurance against international markets as domestic production declines. Global LNG demand rose by 10% in 2017underlining the increasingly competitive nature of international gas markets.

As was explained in the letter of 15 November, gas as a source of heating and power will be the mainstay in the U.K. energy mix for the foreseeable future. Unless something is done to ensure that a minimum level of gas storage is maintained, there is a risk of further closures of U.K. storage facilities and rising exposure to the vagaries of the international gas market. Such a situation will increase the risks to gas and electricity price volatility, which in turn poses a serious threat to economic growth and employment.

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2nd Feb 2018

2nd February 2018