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Predictions of a super chilly winter are good news for gas storage provider Star Energy (STAR, 262p). A long cold snap will result in Britain’s gas supplies being severely tested.
The UK is fast becoming a net importer of liquid natural gas, along with its European neighbours. But we have minimal storage ability, only a feeble 3% of our annual use – equivalent to just 11 days of supply.
The UK’s limited storage capacity makes us vulnerable to supply shortages and price swings. What’s more, we are sitting at the far end of a supply network behind our European neighbours from increasingly unstable sources in Russia and Central Asia. This is an opportunity that is not lost on Star, says the Fleet Street Letter. The price of gas storage has rocketed since the company came to market in 2004, and storage facilities give firms the ability to buy gas cheap in the summer and sell it for a premium in the winter.
Star energy is already the UK’s second-largest onshore oil producer and it also has a number of gas fields that are up and running. Now it is seeking permission for a massive new storage project in Lincolnshire, and for strategic reasons the Government is unlikely to let it fail. If it receives permission to build the new facility, Star Energy could really fly, says the Fleet Street Letter, which has set a price target of 400p – more than 50% up on the current price.
Published in Investment-Advice
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Annunziata Rees-Mogg
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