UK faces unique winter gas exposure with zero storage, IGU warns

The United Kingdom enters the winter season with effectively zero gas storage, a position that leaves it uniquely exposed among major economies according to Menelaos Ydreos, the secretary general of the International Gas Union. Speaking to Energy Voice, Ydreos highlighted the stark contrast between the UK and other major consumers, noting that China maintains around 10% storage capacity and is actively developing further infrastructure. He emphasised that the UK is currently at zero, a situation that diverges significantly from the broader international approach to energy security.

As a general rule of thumb, Ydreos stated that countries typically aim to have between 20% and 25% of their consumption available from storage. The UK currently possesses three billion cubic metres of capacity, with the Rough facility accounting for approximately half of that total. Centrica has indicated that it expects to shutter the Rough facility by April 2027. Ydreos suggested that the revival of such facilities is possible and would be strategically important, arguing that storage moderates price volatility. He warned that without storage, the UK remains exposed to market fluctuations 100% of the time, lacking the buffer that storage provides.

Historically, the UK’s North Sea production and import capacity provided a degree of price security. However, with domestic gas production declining and projects seemingly on hold for political reasons, pressure on the system is mounting. Ydreos questioned the logic of relying on Norwegian North Sea gas while domestic production faces constraints, describing the situation as ideological rather than policy-driven. He noted that if Norway is willing to supply the gas that ultimately serves the UK, the UK should be equally willing to produce its own resources.

The UK government has acknowledged the need for security of supply and is considering various forms of state support. This may include a hybrid delivery model that combines government oversight with commercial operations. A government document from August indicated that any reserve would act strictly as an emergency backstop rather than a routine market intervention. However, developing new storage presents significant challenges, with costs potentially ranging from hundreds of millions to more than one billion pounds. Making such facilities hydrogen-ready could double the price tag. One option under consideration is the use of floating storage and regasification units, which have been adopted by countries such as Brazil, Argentina and Kuwait for peak shaving.

Europe holds more storage capacity than the UK but has been slow to refill this year due to elevated prices. As cold weather approaches, the UK will compete for supplies with both north Asia and Europe. Ydreos noted that the initial phase of this year’s gas crisis was focused on pricing, but it has now evolved into a combined price and supply issue due to historically low storage levels. He warned that regardless of the infrastructure choice, the UK remains subject to the price at the time supply is needed.

The European Union is considering new constraints on gas imports, with reporting for methane regulations due to begin on 1 January and an undecided cap set to come into force in 2028. The IGU has spoken out against these plans, arguing that while it supports methane emission regulations, they must be practicable and achievable. Ydreos stated that if one jurisdiction makes it extremely difficult to deliver a product, supply will go elsewhere. He noted a consensus in the industry that the proposed regulations have gone too far, with some suggestions from the European Commission to relax implementation. France recently called for a one-year delay to the rules.

Challenges remain regarding how supplies can certify emission levels, with equivalency being a major issue. European authorities currently only accept OGMP 2.0. Ydreos also warned of the difficulties in tracing emissions in North America, where liquefaction projects often operate on a tolling basis using gas from networks rather than purely integrated systems. He described the task of tracing a molecule from the wellhead to its final destination, particularly when it is transacted multiple times, as impossible. The IGU has warned that if the regulations proceed, some US suppliers may opt not to deliver to Europe, placing further strain on markets and gas storage. The methane regulations also cover pipelines, raising potential issues for Norway, the UK and Algeria.