Centrica leaves key gas field off-line

It was not a bluff. When Centrica warned a month ago that it might choose to leave one of Britain’s biggest gas fields off-line because of the higher taxes levied on UK energy companies, some thought this was an empty threat.

However, South Morecambe gas field has become available after a period of routine maintenance – and Centrica chose to leave it dormant on Wednesday morning.

A spokesman said the effect of the decisions announced in the last Budget was to increase the total tax rate on this field from 75 to 81 per cent. Consequently, wholesale gas prices have to reach a higher level before it becomes commercially viable to operate South Morecambe.

That threshold had not been reached on Wednesday morning, and so the field remained idle.

 A few notes of caution: Centrica has made clear that it will review its decision on a daily basis. If wholesale gas prices reach the (higher) level needed to trigger production from South Morecambe, the field will restart. That could happen very soon. It remains to be seen whether this shut-down is prolonged or so short-lived that it makes very little difference. The company is likely to reopen the smaller North Morecambe gas field, where routine maintenance is also complete.

But if the government hoped that Centrica was making an entirely empty threat a month ago, that calculation went awry this morning.

Energy Source is no longer updated but it remains open as an archive.

Insight into the financial, economic and policy aspects of energy and the environment.

Read our farewell note

About the blog

Archive

« May Jul »June 2011
M T W T F S S
 12345
6789101112
13141516171819
20212223242526
27282930