* LNG deal to heat 1.8 million homes over 20 years from 2018
* Comes as UK energy supplies continue to decline
* US gas output at record highs; companies look to export
By Oleg Vukmanovic , Lorraine Turner and Edward McAllister
LONDON/NEW YORK, March 25 Britain's Centrica PLC
signed a long-term deal to import U.S. natural gas on
Monday, the first pact of its kind for the island nation as it
weathers a winter energy crisis.
The 20-year deal with U.S. exporter Cheniere Energy Inc
will supply enough liquefied natural gas (LNG) to heat
1.8 million British homes starting in 2018, and comes as
domestic gas production continues to decline while U.S. output
hits record highs.
Reuters reported earlier in March that Centrica, Britain's
biggest household energy supplier, was in talks with Cheniere to
secure the country's first long-term LNG import deal in a bid to
guarantee supplies and tame price spikes.
The issue of gas imports has come to the fore this month as
late winter cold reduced stockpiles to around a 10th of their
capacity, sparking fears of supply restrictions as forecasts
show wintry weather continuing into early April.
Prime Minister David Cameron, under pressure to bolster
Britain's vulnerable energy import infrastructure, welcomed the
Centrica deal, which will diversify the country's energy mix
away from dependency on a small group of existing gas suppliers
and will give Britain its first taste of cheap U.S. shale gas.
"Future gas supplies from the U.S. will help diversify our
energy mix and provide British consumers with a new long-term,
secure and affordable source of fuel," Cameron said in a
statement on Monday.
Booming natural gas production from U.S. shale deposits has
unlocked a plentiful source of cheap gas that producers want to
liquefy for export to higher paying markets overseas. Gas prices
in the UK are on average three times higher than in the United
States at $10 per million British thermal units (mmBtu),
although last week's UK price spikes saw that premium widen
Britain already receives gas from a range of countries
including Norway, the Netherlands and Qatar. But it depends
increasingly on LNG from Qatar to plug its growing energy supply
deficit. High prices in Asia have diverted supplies originally
earmarked for Britain to Japan and South Korea, depleting
strategic stockpiles and sending British prices to record highs
as the cold weather hit.
Shipments of LNG can have a major effect on British gas
prices at times of tight demand. Gas prices fell by up to 20
percent on Monday, relieved by the expected arrival of two
Qatari shipments this week.
However, Qatar and other established exporters refuse to
commit long-term supply on anything but prices linked to
relatively expensive crude oil, while Centrica has sought market
prices. Centrica was forced to settle for a three-year LNG
supply agreement with Qatar in 2011 after talks to secure a
20-year contract fell through.
Despite the deal, Qatari volumes of LNG to Britain plunged
by 68 percent in January from a year earlier, according to
shipping consultancy Waterborne.
Centrica said it would purchase about 1.75 million tonnes
per year (mtpa) of LNG from Centrica's Sabine Pass plant in
Louisiana, the price of which will be linked to U.S. gas prices.
The contract is for an initial 20-year period, with the
option for a 10-year extension. The target date for first
delivery is September 2018.
Under the terms of the deal, Centrica will retain
destination rights for the U.S. cargoes, meaning it could divert
them to other markets during times of low UK demand or high