Wingas onshore gas storage project approved

LONDON (Reuters) - Britain has approved a Wingas project to convert the depleted Saltfleetby onshore gas field in east England into a gas storage facility, the Department of Energy and Climate Change (DECC) said on Thursday.

Wingas, a joint venture between Germany's Wintershall BASF.DE and Russia's Gazprom (GAZP.MM), is expected to build 700 to 800 million cubic metres of gas storage, equivalent to two days of UK gas demand during winter.

Drilling and construction at Saltfleetby is expected to take 30 to 36 months, according to DECC, and the facility would be one of the largest in Britain.

"As the UK becomes increasingly dependent on imported gas, this Government has made it a priority to ensure secure gas supplies," energy minister Charles Hendry said.

"We will introduce measures in the Energy Security and Green Economy Bill to encourage not only more gas storage, but greater gas import capacity to help ensure that our market will deliver gas when it is needed."

The Saltfleetby storage facility is expected to take gas from the Theddlethorpe terminal and increase Britain's gas storage capacity by 15 percent, DECC said.

Britain has a lower ratio of storage as a percentage of demand than France or Germany which can store about a quarter of their annual needs, prompting calls for more capacity to be built to buffer against unexpected supply cuts like those caused by a Russia-Ukraine gas dispute two winters ago.

"We are convinced that the UK needs more storage facilities, in particular seasonal storage, as UK gas production continues to decline," Frank Tauchnitz, managing director of Wingas Storage UK, said.

"The existing storage facilities can cover just 4 percent of the annual gas requirements."

Wingas expects to make a final investment decision on the project in a few months.

Centrica's (CNA.L) Rough is Britain's largest gas storage facility at 3.3 billion cubic metres (bcm) with the country currently building an additional 1.49 bcm of capacity.

(Additional reporting by Daniel Fineren, editing by Anthony Barker)