Centrica: Major gas facility to shut without government help
The boss of Centrica – which owns British Gas – has warned the UK’s largest natural gas storage facility will be “decommissioned” unless the government steps in.
Speaking on BBC Sunday with Laura Kuenssberg, company boss Chris O’Shea called for the government to underwrite the business’ investments in the Rough facility near the East Yorkshire coast.
The facility accounts for about half of the capacity the UK has to store gas.
O’Shea said: “We are a big business, but this asset will lose probably £100m this year because the cost of running it is over £100m.
“If we were to simply spend £2bn redeveloping this field and the summer-winter gas price stays the same, then we will lose that £2bn and we’ll lose the cost of operating the facility. It’s just not sustainable.”
Without government aid, O’She said: “Inevitably what will happen is that this asset will be decommissioned.”
“It will be shut down, and we will remove everything that we’ve got here. We’ll make it like it was never here, and we’ll lose this resilience.”
Centrica calling for ‘cap and floor’ mechanism
The facility was closed in 2017, before partly reopening in October 2022 following the energy crisis triggered by Russia’s invasion of Ukraine.
Centrica said it was in “constructive discussions” with the government regarding support for the site earlier this month.
The firm is hoping for a “cap and floor” pricing mechanism, which would mean if energy prices fall below a certain threshold, its revenues will be topped up, but prices would also be capped if they increase too high.
The company is seeking a “cap and floor” pricing mechanism. This means that if energy prices fall below a certain level its revenues will be topped up, but prices would be capped if they rise too high.
A Department for Energy Security and Net Zero spokesperson said: “As shown by the National Energy System Operator’s independent report, our mission for clean power by 2030 is achievable and will deliver a more secure energy system, which could see a lower cost of electricity and lower bills.
“The future of Rough storage is a commercial decision for Centrica, but we remain open to discussing proposals on gas storage sites, as long as it provides value for money for taxpayers.”
O’Shea, who has been CEO of the FTSE 100 company since 2020, bore witness to a huge shareholder revolt amid plans to boost his pay.
Centrica said it will increase the boss’ salary from £855,000 to £1.1m from 1 April and confirmed that O’Shea’s maximum RSP (Restricted Share Plan) award would be increased from 150 per cent of salary to 200 per cent.
At Centrica’s annual general meeting earlier this month, almost 40 per cent of votes were cast against the remuneration report.