EnCore Oil eyes demerger of gas storage arm

By Chris Wills and John Bowker

LONDON (Reuters) - EnCore Oil is considering a demerger of its gas storage arm and already has utility and bank interest in developing the project, Finance Director Eugene Whyms said on Wednesday.

"If the gas storage business works, it has the potential to make our Exploration and Production (E&P) business immaterial to us," he told Reuters Smaller Companies Forum.

He added that banks and utilities have shown interest in funding the around 1 billion pounds it would cost to convert the decommissioned North Sea gas field -- acquired by EnCore (EO.L) a year ago.

The demerger option would help for tax reasons, he said.

EnCore signed a deal with gas storage specialist Star Energy STAR.L last December to farm out part of a licence acquired through its acquisition of Virgo Energy a year ago.

Star is conducting a feasibility study on the block with the aim of turning it into gas storage -- seen as a future way of securing gas supply to the UK during winter months.

Whyms said the site could potentially hold 150 billion cubic feet of gas, which is 50 percent more than British Gas-owner Centrica's (CNA.L) Rough gas storage site, also a decommissioned North Sea gas field.

Whyms said the potential demerger could take place next year -- around three months after the feasibility study is over.