UK Oil & Gas PLC 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 bcf (1.2 billion m³ 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 m³/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 £0.9 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.