* Work to restart production to begin this year
* Caythorpe storage project remains on hold
* Centrica to shut two gas-fired plants
By Karolin Schaps
LONDON, Feb 23 (Reuters) - Centrica cancelled plans to convert its Bains gas field into a subsea storage site and aims to return it to production, the utility said on Thursday, in a blow to Britain’s efforts to increase energy security through higher gas storage capacity.
The Bains field in the eastern Irish Sea had been due to start storing natural gas at the end of this year with a capacity of nearly one fifth of Britain’s largest storage site Rough, or 20 billion cubic feet.
Centrica was not immediately available for comment to provide more information on the plans.
“We have taken the decision to terminate our Bains storage project, following a review of the results of 3D seismic survey data which indicated that the reservoir would not be sufficiently attractive to convert into a storage facility,” Centrica said in its 2011 results statement.
The statement showed the company made a 33 percent gain in UK oil and gas upstream profits.
Work to resume production from the Bains field is planned to start in the first half of this year.
The UK gas market lags behind storage capabilities of other European countries and the government has repeatedly said investments in new sites are needed to ensure secure gas supply.
But the economics of operating storage facilities have been weak in Britain in recent years as the spread between summer and winter prices has narrowed, making it less attractive for traders to buy cheap gas for storage in the summer for sale at a premium in winter.
Centrica said it was also maintaining its Caythorpe storage project in East Yorkshire on hold while it waited for improvements in market conditions.
“With the UK importing an increasing proportion of its gas requirements, there is a general recognition that the UK is in need of further storage capacity; however, we will only invest in new projects if returns are appropriate for the level of risk undertaken,” Centrica said.
The utility also announced it will shut down two of its gas-fired power plants, Barry and Kings Lynn, with a combined capacity of 555 megawatts (MW) as the cost of burning gas for power production, so-called spark spreads, was too high at such low-efficiency gas plants.
Centrica’s Peterborough, Brigg and Roosecote gas plants are contracted by network operator National Grid to provide backup power production when needed, such as times of high demand or when maintenance threatens regional supply balances.
Centrica and other power plant operators announced a year ago they would idle or reduce output at a number of their gas plants as spark spreads were too low.