Chris O’Shea, head of British Gas owner Centrica, has warned that “time is running short” to ensure the UK’s largest gas storage site, Rough, remains open. The vast undersea facility beneath the North Sea could store enough gas for up to 30 days but needs upgrading, and Centrica says it is costing £10 million a month to keep it open.
Storage site at risk
O’Shea revealed that Centrica has not put any gas into Rough this summer, and by winter it will “be close to exhausted, producing less than 2% of what it could deliver if redeveloped.” He called the site an “important strategic asset” and urged the government to back a £2 billion project to revive it as an enlarged storage facility. Centrica would fund the project but needs guarantees on returns for decades to come.
Wholesale prices surge
Growing concerns about gas supplies have sent wholesale energy prices soaring. The wholesale price of gas in Europe has jumped 50% in the past month as countries compete for supplies amid the ongoing impact of the Middle East war. Christoph Halser, a gas analyst at Rystad, said: “Back in March and April we had just come out of winter and demand was pretty low. Now we are running out of time a bit as this year’s winter approaches, so the price is reacting.”
Wholesale gas prices in the UK have also risen sharply in recent weeks as heatwaves increased demand for air conditioning, especially in London. Sweltering temperatures have reduced output from parts of France’s nuclear power plant fleet, forcing reliance on gas-fired power stations. The UK and Europe also rely on liquefied natural gas (LNG), but several shipments have diverted to Asia as buyers there pay higher prices.
Short-term deal sought
O’Shea said Centrica is talking to government about a short-term deal to boost storage for this winter, which could help keep bills down. “We are willing to do something short-term for this coming winter,” he said. “But every day we lose is a day’s less gas we can get in there. They probably don’t want to go into this winter with less than four days of peak demand in storage capacity.”
Centrica job cuts
O’Shea’s comments came as Centrica revealed it had shed 1,300 jobs in recent months, including 500 cuts announced last month as part of efforts to overhaul customer services and support teams. The overhaul reflects structural changes in customer behaviour, with average calls falling 20% year-on-year and around 90% now using digital support. O’Shea said: “We’re creating an awful lot of jobs, we are growing, but we’ve got to reflect the changes in customer behaviour and we’ve got to give customers what they want.”
Centrica announced a profit of £497 million for the six months to June 30, compared with £549 million the same time a year ago.
