UK Oil & Gas (AIM:UKOG) has announced it will prioritise progressing its South Dorset hydrogen storage project over its original proposal on the Isle of Portland.
UKOG said it determined the South Dorset project has potential for a “significantly increased future annual revenue base versus Portland”.
The company also said South Dorset will likely have a “more competitive submission for government revenue support” under the proposed hydrogen storage business model.
South Dorset hydrogen storage
UKOG subsidiary UK Energy Storage (UKEn) is progressing the South Dorset project, which consists of 24 salt caverns around 1.3km below ground.
After completing a preliminary project design, UKOG said hydrogen withdrawal and injection rates at South Dorset could provide up to 2.9 times the capacity of Portland.
Overall, the project could have a technical maximum storage capacity of 30.2 TWh per year, compared to Portland’s 10.4 TWh per year.
UKOG also said the South Dorset design’s use of a conventional “cushion gas” scheme would reduce project development costs by around 36% compared to Portland.
Developing the South Dorset site would cost an estimated £800 million, around £450m lower than the Portland site.
As UKOG intends to apply for government revenue support for only one of its projects, the company said South Dorset is “more economically competitive”, and it will now “no longer pursue” the Portland project.
Under its current plans, UKOG said it expects to see construction “well under way” at South Dorset by 2030, with the first caverns operational between 2030 and 2032.
UKOG chief executive Stephen Sanderson said the design work, undertaken by German firm DEEP.KBB, outlined “far greater revenues” and profitability at South Dorset compared to the “otherwise robust” Portland site.
“It is, therefore, also likely to be a more compelling case for government revenue support in the forthcoming hydrogen storage procurement process, now scheduled for later this year,” Sanderson said.
“Consequently, our efforts will now be focussed upon this material project and its northern sister in East Yorkshire, both of which plan to utilise simple and proven cushion gas operating technology.”
UK hydrogen storage
UKOG has received backing for its hydrogen storage plans from German energy firm RWE, alongside raising £500,000 from investors to purchase its East Yorkshire site last year.
The company’s Yorkshire site lies near the East Coast Cluster industrial decarbonisation project, while its South Dorset site is located closet to the Solent Cluster.
It comes amid increasing investment in hydrogen storage in the UK, with several oil and gas firms pursuing projects.
Centrica is exploring repurposing its Rough offshore gas storage facility, while North Sea operator Kistos recently purchased two onshore storage sites which it can potentially use for future hydrogen storage.
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