Britain’s energy policy is driving us to Middle East, says gas storage boss

The owner of one of Britain’s biggest gas-storage facilities is ditching investment in the UK for the Middle East because of the Government’s crippling energy policies , its chief executive said. Peter Mann, head of energy group Kistos, said future spending by the company would go to places such as Oman because the UK lacked a stable tax regime for oil and gas. He said the Middle East would remain more appealing than the UK until energy strategy was taken out of ministers’ hands and given to an independent regulatory body.

Mann said this would mean “people know where they stand”. “That ultimately is the key to investment. That stability has gone in the UK,” he said. Kistos Energy owns Hill Top, one of the few remaining gas storage sites in the UK that can deliver the gas equivalent of 11pc of the UK’s daily total. The 46-year-old, son of colourful ex-army officer and mercenary Simon Mann , and, like his father, a former officer in the Scots Guards, founded the company just six years ago.

Since then it has followed a trajectory similar, albeit on a smaller scale, to that of Neo Next+, the 2018 start-up that is now the UK North Sea’s biggest operator. Both have bought up assets pioneered by energy majors but then sold off as they quit the North Sea – driven out by the UK’s divisive energy politics. Mann says he would like to invest more in the UK, including in gas storage projects like Hill Top, but is exasperated by the constant regulatory changes politicians have imposed on the oil and gas industry in recent years.

Kistos is still investing in the UK – but only just. It has bought the nearby Hole House gas caverns too and plans to reopen them for gas storage in the next couple of years. Mann thinks Kistos is the only UK company spending private capital to actually increase the country’s domestic gas storage capacity. Back in 2022, it also bought into gas production with stakes in four fields off the Shetlands known as the Greater Laggan area, along with associated pipelines and a gas plant.

But frustrated by an unpredictable windfall tax regime, bureaucratic paralysis over North Sea drilling and a political class that treats energy policy as a tactical football, Kistos’s future investments are mostly heading abroad. It has recently spent $148m (£110m) on stakes in oil fields in Oman, with plans to invest a further $100m in the next three years, plus similar amounts in Norway’s North Sea – where Kistos bought Mime Petroleum in 2023.

“I think we are the only ones in the UK investing in increasing the capacity of gas storage at this point in time ... But Kistos is not in a place where it has to do things just in the UK, so we can be selective and opportunistic in where we see value,” he says. Such views are increasingly common in the UK oil and gas sector. For Britain, the consequences of this domestic investment freeze are severe – the decline of the North Sea and the UK’s inadequate storage means the country haemorrhages billions each year.

That goes on importing foreign energy – especially gas – subsidising overseas jobs and tax revenues while exposing British households to extreme winter volatility. If Britain manages to keep the lights on and avoid gas shortages this coming winter, it will be thanks in no small part to some of the nation’s largest but least visible assets which are owned by Kistos. They lie deep beneath the rolling fields of Cheshire comprising an array of giant salt caverns pumped full of pressurised natural gas which are now amongst our most vital gas supply bulwarks.

Cheshire’s salt caverns are among the UK’s least appreciated geological assets. Around 200 million years ago the region was covered in shallow seas that evaporated, leaving salt layers hundreds of metres thick, now buried deep underground. They have been mined for centuries – providing, for example, the rock salt that keeps our roads free of ice. But it’s the impermeable caverns drilled into the remaining salt, 600 metres below ground, that are now filled with gas, the region’s most vital energy asset.

“Our caverns are connected to the national transmission network,” said Mann. “We can empty them really quickly and do 11pc of [the] UK’s daily gas requirement, but then you can fill it up quite quickly in three or four days and do the same thing again.” That facility means companies like Kistos can respond fast to changes in demand for gas – releasing more if temperatures plunge and demand surges. Or soaking up surpluses when demand falls.

That buffers the UK’s gas consumers against shortages. And it’s also profitable – for example by exploiting price swings to buy when demand falls or supply surges, and then reselling as prices go up. It sounds like an easy way to make money, but Kistos is now one of just a handful of companies still operating in this market. Its nearest rival is Storengy, a subsidiary of French energy giant Engie, which runs the nearby Stublach site. Another used to be Centrica, owners of British Gas and of the much larger Rough gas storage site – a depleted gas field in the North Sea that could hold about three weeks’ worth of UK gas supply.

However, Chris O’Shea, the Centrica boss, has declared that the site cannot run at a profit and plans to shut it down next April – unless the Government provides funding. The caverns under Cheshire that now help underpin UK gas supplies could have gone the same way. Another facility at Hatfield Moor, near Doncaster, shut down two decades ago, while EDF shut down the Hole House site, in Cheshire, just a few years ago. Hole House is now being reopened by Kistos.

Those closures are one reason why the UK is facing this winter with a wafer-thin margin of gas reserves. “We now have just six or seven days of security of storage available in the UK,” warns Mann. His warnings are echoed by many others. UK storage is only 36pc full, according to energy economist Nick Butler, a former BP vice-president and Downing Street adviser. “That is well below the level in other countries across Europe ... In the circumstances, it is surprising that the UK Energy Secretary has not made a statement on the issue to Parliament,” he wrote on Substack.

Until the UK restores commercial sanity to its energy policy, Cheshire’s salt caverns will remain an isolated buffer against the cold while British capital investment continues to find a warmer, more welcoming home under the desert sun.