I last wrote at length about the 'Rough' gas storage facility five years ago, and the story is taking another turn; so, once again by popular request ...
Many moons ago it was discovered by offshore operators (Amoco) that the 'Rough' gas field they'd developed in the North Sea had almost uniquely favourable reservoir geology. The sandstone is incredibly regular, making it highly suitable for gas storage. So, only a few years after commencing production, they sold it (at a very handsome price) to the old monopoly British Gas, which had decided it could use a mammoth offshore storage facility for seasonal storage (pump gas in during summer, pump it out in winter).
More: BG declared it was an absolute necessity, to support the heavily winter-biased demand of its residential customer base - the first of many porkies it has told in this tale. Pre-privatisation, BG was, remarkably, an unregulated monopoly, though it was still liable to the occasional inquiry into its capital expenditures (which it was of course foisting on us captive customers): so it made a bit of a case for why Rough was essential. I won't bore you with it now, not least because it turned out to be entirely spurious when, a decade later, the privatised BG was being split up and the division which handled BG's residential customer base - still a monopoly at that stage - was invited to bid for whatever capacity in Rough it required to meet customer demand. It bid for ... precisely zero: yes, somehow when push came to shove Rough wasn't essential - it was in fact totally unnecessary.
Anyhow, in the meantime they'd spent around £1bn - quite a lot of money in the 1980s - on converting the offshore production facilities to be able to inject and withdraw gas at will, coupled with substantially upgraded onshore facilities for the same purpose. When anyone tells you (as they often will) that essential utilities are too important to be in private ownership, and that monopolies are the right way to go for efficiently ensuring security of supply etc, remind them about Rough - and apply to me for yet more examples of grotesque monopoly gold-plating at our expense, because they are legion.
Well, the thing had had been built, so it was sunk costs by then. No need to record the complex chain of transactions by which the facility was separated out from what became Centrica, passed through various hands, and eventually was bought back by Centrica to become part of their complex and quite cleverly managed portfolio. (Just in case anyone thinks I have a down on Centrica, read back through the Centrica-tagged posts by clicking on the label below: you'll find I used to have a high regard for them. It's their recent subsidy-farming manifestation I dislike.) Suffice to say, Centrica ran Rough quite intelligently on an open-access commercial basis for many years. Over time, seasonal storage (pump in for 180 summer days, then pump out across the winter period) became less attractive in the face of much more flexible new (and smaller) onshore gas storage facilities, plus increasing access to a big surfeit of storage capacity on the continent (another long story) via two big cross-channel pipelines, plus burgeoning LNG import capacity of a very flexible nature. Even then, Centrica was able to respond with clever, more flexible storage packages which they delivered via use of Rough.
Eventually as the beast grew older, they needed to think about how long it would last. There was a small explosion at one point, and other old-age mishaps. Ten years or so ago, they started angling for government money, firstly to build more storage, then to bail them out at Rough itself. They started spinning yarns about safety, and how much new drilling would be required to replace the old wells, and how only a subsidy would allow them to do this, and how we'd all freeze in winter if they closed it down. They didn't convince anyone, so five years ago they shut it down, saying they would pump out the rather large amount of "cushion gas" - the minimum inventory a gas storage facility requires to operate at all - and that would be the end of it. Amazingly enough, once again, it turned out that UK plc managed quite nicely without Rough, thank you very much. The wonders of the free market, which was comfortably delivering all the necessary seasonal flexibility without any subsidy whatever.
More recently, Centrica somewhat unexpectedly started hinting that all might not be over at Rough. First, they suggested it might be converted for CO2 storage ... then (as hydrogen started to become all the rage) for hydrogen storage - all somehow needing a big subsidy (because, of course, it's all totally uneconomic). And there was everyone believing they'd pulled the plug forever / it was rickety and unsafe / etc etc.
Now ... it turns out they think they can press it back into service as a regular natural gas storage facility - by October! FFS! They've just obtained two of the permits they need to be able to do so - and, needless to say, are in intense negotiations with the ever-gullible Civil Service for what public money is going to be sent their way for coming to the rescue this winter, when Putin's punishment reaches its wintry worst. Inventing a whole new rationale - a strategic reserve of gas (equivalent to a whole couple of days' worth to start with, maybe rising to 10 days' worth with a big refurb job. 10 days, just think ...) Well, fair to say, times are different now.
We can only hope someone in Whitehall is playing back to Centrica its bullshit statements of many years, and giving them a very hard time. Somehow, though, I doubt it.
ND