Economic Report 2017

E C ONOM IC R E P OR T 2 0 1 7

Figure 12: Day-Ahead NBP Nominal Gas Price

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100

2 0 D ay - )ht /p( ecirP saG lanimo N P B N daehA 4 0 6 0 8 0

0

2 010

2 011

2 012

2 013

2 014

2 015

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Source: I CI S H eren

Zough storage Ĩacility, the largest seasonal storage Ĩacility in the UK, has edžƉerienced ongoing oƉerational Ɖroďlems oǀer the last tǁo years͘ In :une last year, oƉerations ǁere temƉorarily ceased leading to entrica ^torage announcing this summer that the Ĩacility ǁill not ďe returning to inũection and storage oƉerations this year. T h is is due t o w e ll int e gr it y issue s and facilit ie s r e ach ing or ap p r oach ing t h e e nd of t h e ir de sign- life . Sh or t - t e r m r e fur b ish m e nt or r e b uild op t ions r e q uir e d t o b r ing dow n longe r - t e r m r unning cost s ar e not se e n as e conom ically ǀiaďle and, as a conseƋuence, the remaining ϱ͘2 ďillion cuďic metres ;ďcmͿ oĨ cushion gas ǁill ďe Ɖroduced and the fie ld w ill ce ase t o b e use d as a st or age facilit y 13 . ^hiƉƉers ǁill looŬ to alternatiǀe oƉtions Ĩor storage, ǁith much ďeing deliǀered ǀia the interconnector Ĩrom acton Gas T e r m inal t o Z e e b r ugge w h e r e it w ill b e t r ansp or t e d and st or e d in ot h e r facilit ie s in m ainland E ur op e . T h e Ĩuture ǁithout Zough, ǁhich accounted Ĩor oǀer 70 Ɖer cent oĨ total ritish storage caƉacity, ǁill Ɖut an increased r e liance on ot h e r sour ce s of gas st or age . Ne w inv e st m e nt s in se asonal gas st or age cap acit y ar e no longe r as e conom ically at t r act iv e as t h e sw ing b e t w e e n sum m e r and w int e r gas de m and h as dim inish e d ov e r r e ce nt y e ar s. T h e announce m e nt t h at R ough w ill p e r m ane nt ly ce ase st or age op e r at ions cont r ib ut e d t o t h e gas p r ice r e b ounding b ack int o t h e m id- t h ir t ie s r ange aft e r dr op p ing t o an annual low of 25 p / t h at t h e st ar t of J une . T h e av ailab ilit y of UK gas st or age cap acit y w ill b e a ke y fact or in de t e r m ining h ow t h e m ar ke t de v e lop s ov e r t h e se cond h alf of t h e year, alongside more traditional Ĩactors such as regional and gloďal suƉƉly and ǁinter temƉeratures͘

13 ^ee ǁǁǁ͘centrica͘comͬneǁsͬcessationͲstorageͲoƉerationsͲrough

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