Centrica Agrees $3.25 Billion Deal With Qatar for LNG Supply to Britain

Centrica Plc, the U.K.’s biggest energy supplier, agreed a 2-billion pound ($3.25 billion) deal with Qatar to deliver liquefied natural gas to the U.K. as the country seeks to replace dwindling North Sea reserves.

The three-year contract with Qatar Liquefied Gas Co. to deliver 2.4 million metric tons of gas every year will meet about 10 percent of Britain’s annual residential demand, Windsor, England-based Centrica said in a statement today.

Britain, Europe’s biggest gas consumer and the world’s fastest-growing major gas importer, is booking more seaborne imports of the fuel from the Middle East, Africa and the Caribbean as North Sea production declines. The country is seeking to contract supplies in multiyear deals to shield customers from price volatility.

“This is the first step; if this arrangement is successful, I expect that this will lead to a longer term arrangement,” Centrica Chief Executive Officer Sam Laidlaw said, speaking to reporters in Doha, Qatar. An ideal long-term contract would be for 10 years or more, Managing Director Mark Hanafin said on a conference call with journalists.

Qatar accounts for about 15 percent of proven world gas reserves, ranking third behind Russia and Iran. In 2010, 15 percent of the U.K.’s natural gas was supplied by Qatar, Centrica said in the statement. By 2025, LNG may account for as much as 50 percent of the country’s total supplies.

“This is an important step towards greater energy security for Britain,” British Prime MinisterDavid Cameron said at a press conference today in Doha. “It’s also good for British consumers.”

First Delivery

The first delivery under the contract is due in June and will go to National Grid Plc’s Isle of Grain LNG terminal, Centrica said. Half of the 70 slots controlled by Centrica at the terminal will be taken up with shipments under the contract.

The price of the fuel is not oil linked, Hanafin said. The company has committed to buying a specific volume of gas and may pay more or less, depending on floating prices, he said.

Centrica rose as much as 4 pence, or 1.2 percent, to 342.7 pence and traded at 340.6 pence at 10:41 a.m. in London. The stock has risen 25 percent in a year, valuing the company at 17.5 billion pounds.

U.K. natural gas fell as network manager National Grid forecast an oversupply of the fuel and after Centrica signed the agreement. Power declined along with the fuel.

QatarGas

Seventeen of the 23 cargoes Centrica bought in 2010 came from Qatar, it said in a separate statement. The company has purchased a total of 2.5 million tons of LNG from the country on the short-term gas market.

QatarGas, as the company is known, is a venture between state-run Qatar Petroleum, Exxon Mobil Corp., ConocoPhillips, Total SA and Royal Dutch Shell Plc.

Centrica has sought to shore up its gas resources by acquiring North Sea fields and LNG production. The company bought Venture Petroleum Corp. in 2009 and paid $380 million for Suncor Energy Inc.’s gas assets in Trinidad and Tobago in February 2010. The Trinidad deal provided Centrica with its first opportunity to own LNG production.

“The key to the U.K. energy security is diversity,” Hanafin said. “We’re scouring the world for these kinds of deals.”

(Source: http://www.bloomberg.com/news/2011-02-23/centrica-agrees-3-25-billion-gas-deal-with-qatar-for-lng.html)