TIDMUKOG
RNS Number : 1548N
UK Oil & Gas PLC
30 May 2022
UK Oil & Gas PLC
("UKOG" or the "Company")
Future hydrogen-ready energy storage project
UK Oil & Gas PLC (London AIM: UKOG) is delighted to announce
that its wholly owned subsidiary, UK Energy Storage Ltd ("UKEn")
has signed an Agreement to Lease ("A2L") with Portland Port Limited
("PPL") covering two sites at the former Royal Navy port in Dorset,
with the intent to develop, subject to new planning consent and
securing necessary development finance, a planned integrated
Energy-Hub, centred around hydrogen-ready gas storage and a future
green hydrogen generation capability.
UKOG's Portland Energy-Hub concept:
As agreed between the parties, UKEn's planned Energy-Hub
development concept seeks to reinvigorate and build further upon a
prior unrealised project by Portland Gas Storage Ltd, granted
planning consent by Dorset County Council in 2008, to situate
approximately 43 billion ft(3) "bcf" (1.2 billion m(3) or "bcm") of
underground salt cavern storage beneath PPL's land. Utilising
established engineering concepts, public record planning
submissions, publicly available data, UKOG internal studies and
technical, engineering and economic modelling advice from Xodus
Group ("Xodus"), the planned new Energy-Hub is envisaged to include
the following key elements:
-- A strategically located hydrogen-ready Energy-Hub within an active harbour site;
-- Construction of up to 43 bcf (1.2 bcm) of hydrogen-ready salt
cavern storage. For context, if this capacity is ultimately
achieved it would materially increase the UK's current reported 61
bcf (1.7 bcm) total working underground gas storage capacity. The
envisaged hydrogen-ready build also means the site could hold
either hydrogen or natural gas from operational inception;
-- Salt cavern storage would be linked to the national pipeline
transmission system ("NTS") via a new planned hydrogen-ready
pipeline. As per the prior 2008 project, the new pipeline would be
designed with an envisaged capacity designed to be capable of
handling up to 1 bcf/day (28 million m (3) /day). For context, this
throughput capacity, if achieved, would equate to approximately one
seventh (14%) of current estimated UK daily natural gas
consumption;
-- Pilot scale green hydrogen production and storage, together
with hydrogen battery concept investigation. The Company and its
consultant Xodus plan to develop future potential to supply
renewable electricity for green hydrogen production at the site via
an over-the-horizon floating wind farm, an area of Xodus
expertise;
-- Addition of a new planned LNG import facility in the port,
designed to optimise cavern-fill cycle times and maximise revenues.
The Company's ambition is to source long-term LNG from the USA and
other secure suppliers;
-- Development planned to be 'future-proofed' by engineering
designed to transition seamlessly into green hydrogen production
and storage as the 'hydrogen economy' evolves;
-- Local high geothermal heat gradient to be investigated for
possible local heat network and/or to power green hydrogen
production;
-- The Company and PPL will also jointly investigate the
potential for using future green hydrogen generation at the port to
directly fuel future hydrogen propelled ships. The possibility of
future green hydrogen export by ship will also be explored.
Stephen Sanderson, UKOG's Chief Executive, commented:
"It's hard to recall a time in recent history in which the
critical importance of energy security and the resilience of the UK
energy system has been so much in the public and governmental eye.
UKOG is therefore delighted to announce the intention to develop an
infrastructure project, fully in keeping with the government's new
British Energy Security and Hydrogen Strategies and National Grid's
2021 Future Energy Scenarios ("FES"), that could both materially
strengthen the UK energy system's resilience to supply and demand
shocks, plus provide the foundations for a potentially significant
and strategic element of the future green hydrogen economy."
A2L and Lease:
In return for an annual ground rent, a future gas throughput
tariff and related LNG vessel berthing charges, the A2L conveys to
UKEn the exclusive right to proceed with the development and enter
into a 30-year lease should certain conditions be met to UKEn's
satisfaction (namely: final property due diligence, planning and
regulatory permits, sufficient development finance and the site
being free from significant contamination).
The A2L contains agreed forms of the Lease and Operating
Agreements and contains a longstop date which, unless otherwise
agreed, will allow UKEn to terminate if the conditions have not
been met within 4 years of the effective date. The lease also
grants UKEn the discretionary right at 5-yearly intervals to
continue or break the lease. At the end of the initial lease UKEn
has the discretionary right to extend the lease for a further
30-year lease period on the same terms. The aggregate total ground
rent payable by UKEn up to the A2L longstop date is approximately
GBP0.9 million.
Next steps:
The Company intends to complete further detailed engineering and
commercial studies, followed by the preparation and submission of a
detailed planning application. Where appropriate and to reduce the
planning consent cycle time, the Company intends to update and
utilise pertinent aspects of the prior consented development in its
planning submission.
The Company has been advised by Zetland Ltd, its planning
consultants, that the scale and nature of the Energy-Hub
development is expected to qualify as a Nationally Significant
Infrastructure Project ("NSIP"). This would require planning
consent to be sought via an application for a Development Consent
Order ("DCO") directly to the Planning Inspectorate. Ultimate
authority over the decision on whether to issue a DCO would rest
with The Secretary of State for Levelling Up, Housing and
Communities.
For further information, please contact:
UK Oil & Gas PLC
Stephen Sanderson / Matt Gormley / Allen Tel: 01483 941493
D Howard
WH Ireland Ltd (Nominated Adviser and
Broker)
James Joyce / Andrew de Andrade Tel: 020 7220 1666
Communications
Brian Alexander Tel: 01483 941493
The information contained within this announcement is deemed to
constitute inside information as stipulated under the retained EU
law version of the Market Abuse Regulation (EU) No. 596/2014 (the
"UK MAR") which is part of UK law by virtue of the European Union
(Withdrawal) Act 2018. The information is disclosed in accordance
with the Company's obligations under Article 17 of the UK MAR. Upon
the publication of this announcement, this inside information is
now considered to be in the public domain.
Notes:
Green hydrogen: a product of the electrolysis of water using a
renewable source of electricity such as wind or solar. The 2021 UK
Hydrogen and 2021 FES reports provide forecasts for hydrogen
production, storage, demand and its use in power generation, energy
storage, rail and road transport, fuel for shipping and aviation,
domestic and industrial heating and direct air carbon capture.
Green hydrogen storage: Hydrogen as an energy storage medium is
envisaged to provide the ability for both short-term and longer
term interseasonal storage, which can be rapidly converted to
electrical power via clean combustion (i.e., a hydrogen battery).
The four modelled 2021 FES scenarios state hydrogen storage as an
integral piece of achieving net zero, helping to manage both
seasonal swings in demand for heating and capturing excess
renewable electricity at times of low demand for subsequent quick
release during peak demand.
The FES scenarios envisage UK underground hydrogen storage
capacity requirements by 2050 (predominantly in new salt caverns)
to be between 12 and 50 TWh, some 3 to 10 times greater than the
UK's current underground storage capacity (note: that since
hydrogen has one third the energy capacity of natural gas, the
current underground natural gas storage capacity of c. 14 TWh (61
bcf/1.7 bcm) would reduce to around 5 TWh if filled with
hydrogen).
In energy equivalent terms the Portland site as envisaged could
provide a material 4 TWh of short to long term hydrogen
storage.
Gas storage: is a fundamental element of the current energy
system that helps provide the system's resilience to meet any
energy shortfall during periods of extreme demand, adverse weather
and/or when other power generation sources aren't available (such
as the nuclear outages and weather-related reduction in wind power
of 2021 necessitating coal fired power to be utilised to meet
demand). Gas storage helps stabilise the gas market and is an
insurance against disruption and price volatility. It can also
provide short-term physical security of supply.
The UK ranks 12(th) in underground storage capacity compared to
EU countries and has seen its storage capacity significantly
decline since the closure of the offshore Rough field in 2017,
which supplied around 70% of the UK's capacity. Currently UK
underground storage contains an equivalent of approximately 8 days
UK gas consumption, less than a tenth of Germany's supply capacity.
Whilst the UK's low storage capacity is partly offset by gas
production and LNG imports, the predicted UK N. Sea production
decline and move away from Russian gas imports could expose the UK
to the same gas supply vulnerability as its EU counterparts,
strengthening the strategic need for increased natural gas storage
capacity in the immediate energy transition.
Hydrogen battery: the storage of green hydrogen, generated from
surplus seasonal renewable electricity (wind and solar), for future
rapid combustion and power generation to meet peak energy
demands.
Hydrogen ready: the small size of the hydrogen molecule and its
interaction with high grade steels causes the metal to become
brittle with time. Consequently, the steel and engineering
specifications currently used in today's natural gas facilities
will require modification to be fully compatible for hydrogen.
UKOG, therefore, aims to build-in hydrogen compatibility during
initial construction, thus future-proofing any Portland Energy-Hub
development.
Over the horizon floating wind farm: An offshore wind farm
hidden from any shore based visual observation (i.e., located
beyond or over the visible offshore horizon). Such a windfarm would
be located to prevent any visual impact to Dorset's Jurassic
heritage coastline. Floating turbine installations are secured to
the sea floor by cables and anchors in the same manner as offshore
platforms and drilling rigs (see:
https://www.youtube.com/watch?v=sgCA5e7K7r8 ).
Salt caverns: man-made caverns constructed by the physical
dissolution of naturally occurring halite (rock salt) deposits. The
dissolution provides a gas tight cavern space that is permanently
filled with gas and/or brine at an equivalent pressure to that
within the surrounding rocks i.e., it is not an empty void at any
time. Portland Port is ideally situated for the construction of
large caverns as it overlies a thick, high quality halite section
of Triassic age. Halite deposits with sufficient thickness to
accommodate significant caverns are confined to three areas of the
UK: S. Dorset (Triassic), Cheshire (Triassic) and the northeast
Yorkshire coast (Permian Zechstein age). Thinner Triassic halite
deposits are present in areas of the NW and Somerset. Active salt
cavern gas storage exists in Cheshire and the northeast.
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This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
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