UK gas supply worries ease as storage site to open more wells for withdrawals

By Nina Chestney

LONDON (Reuters) - Twenty wells at Britain's Rough gas storage site should be available for withdrawals from Nov. 1, Centrica Storage Limited (CSL) said on Monday, above the operator's previous estimate and easing concerns about record low gas stocks this winter.

Centrica, which owns British Gas, one of Britain's largest energy suppliers, imposed restrictions in March last year on how much gas could be stored at Rough as a safety precaution after identifying potential issues with well integrity.

Following investigations, Centrica shut down the facility for injections and withdrawals of gas in June this year and then said the outage would be extended until March or April next year.

However, it also said it hoped to be able to re-open at least four wells for withdrawals only by Nov. 1, 2016.

Britain depends on stored reserves to help manage winter demand spikes and to ensure security of supply. The Rough site accounts for more than 70 percent of the country's storage capacity, National Grid data shows.

There were fears Britain could go into next winter with very low levels of gas stocks, because if only four wells returned to service, the site would have a maximum withdrawal rate of around 5 million cubic metres (mcm) per day.

If 20 wells are available for withdrawals, the maximum withdrawal rate is around 35 mcm/d, based on CSL data earlier this month.

"It certainly eases concerns (about stocks). It has had an impact on the first quarter price and beyond and hopefully it will mitigate future issues if Centrica can address problems now," said Nick Campbell, an analyst at Inspired Energy.

The British gas prices for delivery this winter fell by 0.90 pence to 40.90 p/therm at 1122 GMT, having previously traded at a high of 42.20 p/therm earlier on Monday.

The Q1 2017 contract was down 0.40 pence at 43.70 p/therm.

However, CSL added it could not increase the reservoir pressure at Rough while it was doing its well testing programme, so no wells were currently available for injection.

(Additional reporting by Susanna Twidale; Editing by Jason Neely and Mark Potter)