UK gas supply shortfall

Offshore staff

(UK) - Analysts ILEX Energy Consultancy warns that Britain is facing potential problems concerning gas storage. In a new report commissioned by the UK Offshore Operators Association, ILEX claims several factors are blocking investment in the new facilities needed to offset unforeseen supply disruptions.

The main one is the 'storage paradox': when gas prices are low, demand for storage also drops, while when prices are high, no one can afford to build new storage complexes.

The report, called 'Storage, Gas Prices and Security of Supply', provides an analysis of the different types of storage currently used to meet the UK's needs and the probable provision for new storage emerging this decade.

Currently, Britain has one offshore storage facility, the depleted Rough field, which has capacity of around 3 bcm, equivalent to 3 bcm of annual national needs. Converting further depleted offshore fields would involve a large capital outlay and high operating costs: at the current annual market price of 50 p/therm, the market value of the new storage would have to exceed 21-24 p/th to make such an investment worthwhile.

11/29/05