Encore Oil shares dive on gas storage complication

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Encore said last November it may have to redesign the facility after preliminary tests, sending its share price tumbling.

It has since concluded the project is technically viable and gas storage facilities urgently needed.

But Star Energy has gone off it for economic and strategic reasons, Encore said.

Encore shares, listed on London's junior AIM market, were down by 20 percent at 7.7 pence by 15:45 today.

"Encore is not alone in believing that the UK is woefully short of gas storage capacity, only recently highlighted by the supply disruptions in Eastern Europe," said Alan Booth, Encore's chief executive officer.

"The project is technically viable and we will seek to move the project forward, although the constraints caused by the current capital and debt environment make it difficult to assess the likelihood of attracting further investment in the near term."

Although one of the biggest consumers, Britain has less storage space than most other western European countries and needs more to cope with seasonal fluctuations in demand and supply disruptions.

Germany can store more than twice as much gas as Britain, which helped it get through a two-week Russian supply cut at the start of January and even boost supplies to its central European neighbours during the crisis.