UPDATE 1-Qatargas signs 5-yr deal to supply LNG to UK from Jan
* Supply deal begins in UK mid-winter peak demand period
* Qatargas to supply neighbouring terminals in Wales
DUBAI, Sept 17 (Reuters) - Qatargas has signed a five-year deal to supply 1.14 million tonnes a year (mtpa) of liquefied natural gas (LNG) to Petronas in Britain, the world's largest LNG exporter said on Tuesday.
Britain's falling domestic gas production has made it heavily reliant on imports of LNG, especially from Qatar, over the last few years, with rising competition for supplies raising fears over UK winter gas supplies.
Under the deal, which comes into effect when UK gas demand often peaks in January, Qatargas will deliver fuel to the Dragon LNG Terminal, where state-run Malaysian company Petronas holds half the import capacity.
Qatargas and its Qatargas 2 project partner ExxonMobil are already the biggest gas suppliers to the nearby South Hook import terminal at Milford Haven in Wales.
Now Petronas, which shares Dragon with BG Group, will be supplied from the Qatargas 4 (Train 7) LNG export plant in Qatar, a joint venture between Qatar Petroleum and Royal Dutch Shell.
"This is a ground-breaking agreement between two well established and leading companies in the LNG sector, which further strengthens the existing relationship between Qatargas and Petronas," Qatari energy minister and Qatargas chairman, Mohammed Bin Saleh Al-Sada, said in a statement.
Qatargas did not say when the first deliveries would be made but Petronas is likely to get the highest prices for the gas it can pump into the UK gas grid in the coldest winter months of January and February.
Petronas is one of the world's top LNG producers but ships nearly all the super-cooled gas it produces on the island of Borneo to other Asian markets where sales prices are typically higher than in Europe.
But rapidly rising demand at home has led the state giant to build LNG import terminals in Malaysia and Qatargas began supplying Petronas' first LNG receiving terminal there in July.
Petronas' 50 percent stake in the Dragon import terminal gives it the capacity to import around 2.7 mtpa of LNG into the UK, Europe's biggest gas market.
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