Isra-Mart srl : UK Gas Storage Projects Face Significant Challenges - Indus

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Development of new gas storage projects in the U.K. may stall amid continued uncertainty among investors over the possibility of a supply overhang and access requirements, industry analysts said Tuesday.

Speaking at the U.K. energy regulator Ofgem's Winter Outlook seminar, Poyry Andrew, a market analyst at consultancy Morris, said there is ample supply of gas in the short term to meet both U.K. and most of continental Europe's needs through to 2012, although uncertainties over consistency of pipeline supplies from Russia and Norway remain relevant.

Morris said consequently "the viability of new gas storage projects is certainly in question; the proof is that there are several sites that have planning permission in place, but final investment decisions still haven't gone through yet."

The analyst said many projects in Germany have also been put on hold as industry participants have realized there is sufficient storage already available but the difficulty is in "access to existing storage" facilities.

A lack of clarity over Ofgem's Third Party Access requirements could also play an important role in determining the risks of larger storage projects, Oxera analyst Tom Tindall added.

Centrica PLC (CNA.LN) recently put plans for an East Yorkshire gas storage project at Caythorpe on hold amid confusion over exemption to third-party access.


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