Centrica Signs £2 Billion Gas Deal with Qatar

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--As North Sea gas supplies dwindle, Centrica plc (OTC:CPYYY) (Windsor, England) has signed a £2 billion ($2.7 billion) deal to buy gas from Qatar.

The company said that it will purchase around two million tonnes of liquefied natural gas (LNG) from Qatargas (Doha, Qatar) each year from January 2019. The LNG will be supplied from Qatargas 4, a joint venture between Qatar Petroleum (70%) and Royal Dutch Shell plc (NYSE:RDS-A) (The Hague, Netherlands) (30%), with a production capacity of 7.8 million tonnes per annum. It will be delivered by Q-Flex and Q-Max LNG vessels to Isle of Grain Terminal in south-east England.

Iain Conn, Centrica chief executive officer, said: "The scale of our gas demand and our strong energy marketing and trading capabilities mean we are ideally placed to work with LNG producers across the world, providing flexibility and a route to market at a time when secure market access is increasingly important."

The U.K. relies on imports for about half of its gas today but this is predicted to jump to two-thirds in the coming years as North Sea supplies fall. LNG makes up a third of that and more than 90% of it comes from Qatar. Centrica believes that with the decline in North Sea production and the recent growth in global LNG supply, the U.K. is "increasingly becoming an attractive destination for LNG".

"We are delighted to extend our strong relationship with Centrica and the U.K.," said Saad Sherida Al-Kaabi, Qatar Petroleum president and chief executive officer, and chairman of Qatargas Board of Directors. "This agreement underscores Qatargas' reputation as a safe and reliable supplier of LNG. Furthermore, this agreement has the potential to positively contribute to the United Kingdom's energy security for years to come."

This is the third consecutive gas deal with Qatargas and it will run until 2023. The first ran from 2011 to 2014 while the second, and current, deal is a four-and-a-half year deal that will finish at the end of 2018. It should be noted that yearly volumes for the third deal are lower than the previous two deals, which stood at 2.4 million tonnes and 3 million tonnes, respectively. This could be down to Centrica's British Gas business losing large numbers of domestic gas customers. Last month, it emerged that the company had lost 400,000 households in the U.K. between January and June, mainly to independent suppliers. Centrica also experienced a tough first six months this year and reported decreasing profits in its power generation business as well as its gas exploration and production business.

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