Energy company Centrica is in “very encouraging” talks with the UK government over a £2bn ($2.4bn) proposal to restart the Rough offshore gas storage facility this winter and ultimately convert it into the world’s largest hydrogen storage sites, says CEO Chris O’Shea.

Rough, a depleted gas field off England’s northeast coast that has been closed since 2017, has the potential to be a key enabler of the UK’s planned expansion of low-carbon hydrogen production capacity to 10GW by 2030, O’Shea told analysts on an interim earnings call.

“We remain in active conversation with the UK government on the role this asset can play in the future of hydrogen, and we are very encouraged by the discussions,” says O’Shea.

“It is in our view impossible that this [2030] target can be met without hydrogen storage capacity. Once you start to use it, you have to have an uninterruptible supply.”

£2bn – Projected cost of restarting Rough and converting it to hydrogen

Centrica, the UK’s largest energy supplier, could fund the conversion of Rough itself or with equity partners and is not seeking direct government support in terms of capex. But it would need the government to guarantee returns on the investment via a regulated asset model such as those used for nuclear capacity, rather than running Rough as a merchant asset exposed to fluctuating returns.

“We are highly unlikely to invest in a project of this scale in such a nascent market on a merchant basis,” O’Shea says.

The government plans to design a business model to support hydrogen transportation and storage infrastructure by 2025.

Ready for winter

Decommissioning of Rough is still scheduled to start within the next two years at a cost of around £300mn, O’Shea says.

But proposals are under discussion to restart the site this winter to help to ease the gas supply and affordability crisis caused by Russia’s invasion of Ukraine.

Centrica has been granted a new storage licence for Rough, although this is not sufficient to allow for the full re-opening of the site, O’Shea says. If the re-opening is approved, then it would be phased process with Rough likely to make available only c.30bn ft³ (850mn m³) of capacity this winter, equivalent to nine LNG cargoes, he says.

“You could have investment next year to double that and ultimately you can make a choice whether you want to take it up to 200bn ft³. That would the largest storage facility in Europe—there is nothing bigger than that,” he says.

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Author: Stuart Penson