UK decides against market intervention to boost gas storage

By Karolin Schaps

LONDON (Reuters) – Britain’s energy secretary on Wednesday decided not to intervene in the market to boost gas storage capacity, saying that subsidising projects would be too expensive for taxpayers.

Gas stocks in Britain, Europe’s biggest gas consumer, were near depletion last winter when a prolonged cold spell boosted demand for gas used in heating systems.

At the time, the government commissioned a report to verify whether it needed to intervene to increase gas storage capacity after several companies, such as Britain’s biggest domestic gas supplier Centrica, put uneconomic storage projects on hold.

Secretary of State for Energy and Climate Change Edward Davey said in a parliamentary statement that his department sees no clear case for intervention in the gas market, following analysis of three intervention options.

“Our analysis shows that, although such interventions could enhance our gas security, under most scenarios they would not do so cost-effectively,” Davey said in the statement.

Profits from running gas storage facilities in Britain have dropped in recent years due to the shrinking price differential between summer and winter gas prices.

Gas traders typically buy gas in summer when prices are low and sell it at a profit in winter when higher demand lifts contracts, but that spread has now tightened.

Centrica said in July its Baird and Caythorpe gas storage projects may require support from the government to become profitable because current market conditions were challenging.

Two storage facilities are currently under construction in Britain, at Stublach and Hill Top Farm in Cheshire, even though the latter has been plagued by delays.

(Editing by James Jukwey)

UK decides against market intervention to boost gas storage