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Corrected: New LNG deal will not guarantee more UK supply: Centrica

06 Nov 2013 21:09:00 | esgm

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In the sixth paragraph, an incorrect figure was given for the amount of gas flowing from the Isle of Grain terminal into the British system. This has now been changed. A corrected story follows.

 

A new LNG supply contract between British utility Centrica and Qatargas will not guarantee an increase in deliveries to the NBP, ICIS has learned.

Centrica agreed on Wednesday to a four-and-a-half year LNG supply agreement with Qatargas for the purchase of up to 3 million tonnes per annum (mtpa) of LNG (equivalent to 4.2 billion cubic metres (bcm) of natural gas a year) between 2014-2018.

But actual volumes to flow into the British NBP over that time could be substantially lower should Qatargas choose to send the gas to locations where prices are higher, a Centrica spokesman said.

The £4.4bn (€5.2bn) contract will commence in June 2014, and represents an increase in the highest possible amount that Centrica can purchase from Qatargas, from 2.4mtpa of LNG (or 3.4bcm of natural gas) in the last supply contract to 3mtpa in this.

“Prices will reflect where Qatargas chooses to send the gas, but the gas that is sent to Centrica will flow into the NBP system,” said a spokesman.

In 2012, 2.3bcm of gas flowed into the British system from Isle of Grain. This figure, however, also includes LNG send-out from other capacity holders at the facility.

But with a number of new avenues of supply set to come on line in the next few years, the discrepancy between Asian and European LNG prices – a factor which has seen deliveries to Europe decline substantially in the last two years – could narrow.

The first US LNG exports plant – Sabine Pass – is expected to come on line in 2016. Following that, incremental start-ups of subsequent plants are expected to come on stream at a rate of about one a year (see ESGM 18 October 2013).

Additionally, new LNG supply coming from Australia is set to hit the global market, which could help reverse the trend of declining exports to Europe.

Forecasts are uncertain, with commercial volumes expected to come on line anywhere between the second half of next year and 2016, with sources concurring that 2015 is the most likely start-up time.

The Centrica spokesman said that there was no direct link with the new LNG deal and funds made available through the company’s recent decision to abandon its UK Baird and Caythorpe natural gas storage projects (see ESGM 22 September 2013). Jack Elliott

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