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Plans to build vital facilities to help Britain secure its energy supplies at a time of increasing fears about reliance on Russian gas are in doubt as a result of the credit crunch, energy groups warn.
Stag Energy says the credit crunch is making it harder to raise the £600m for the Gateway project to build a storage facility beneath the Irish Sea. It received planning permission for the project in November.
The UK has storage capacity of about 4% of average annual consumption, or about 14 days' worth. This compares to Germany's reserves equivalent to 21% of annual consumption and France's 24%.
This makes the UK, which imported about 40% of its gas last year, more vulnerable to supply disruptions. As North Sea output declines, Britain is expected to import up to 80% of its gas by 2015.
The aim of the Gateway project is to construct 19 underground caverns to store 1.5bn cubic metres of gas, or about five days' supply of UK consumption.
Last week the energy industry wrote to the government to warn that it was currently uneconomic to build storage facilities unless tax breaks were granted. Only a handful of storage projects have made it to the construction phase.
Stag Energy has appointed the investment bank Lazard to find a partner willing to stump up the finance in return for the right to use the facility. Stag claims to be in negotiations with six companies, but one of the potential investors mentioned told the Guardian that it had not had any contact with Stag since March. George Grant, managing director of Stag Energy, admitted: "One has to say that the credit crunch is having an impact across the board. It's too early to say definitely whether there will be a delay or not."
In November, another storage developer, Portland Gas, admitted that it was suspending plans to build a £500m, 1bn cubic metre facility in Dorset. The company hopes to secure funding this year.
Andrew Hindle, chief executive, urged the government to consider introducing a storage obligation on gas suppliers to speed up construction. This would require suppliers to store a proportion of their gas in the UK. "A storage obligation exists in some countries in Europe and it is being looked at by the EU," he said.
"It could be the solution to ensure that there is enough storage built in Britain."
In a letter last week to Revenue & Customs, a group of utility companies including EDF, Portland Gas and Centrica complained that because they did not know the price of gas in five years' time - the time it takes to develop a facility - it was hard to raise the financing. Referring to the dispute over gas supplies between Russia and Ukraine, they said: "This acts as a timely reminder of supply risks that now face the UK."
Five years ago, the regulator Ofgem predicted that the UK would have built 10bn cubic metres of capacity by the end of the decade. But the current capacity is only about 4.3bn cubic metres.
Ed Miliband, secretary of state for energy and climate change, is understood to be looking at the issue.
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