* Qatargas to deliver 2.4 mln tonnes of LNG/year * First gas to be delivered in June
* Worth about 2 bln pounds ($3.24 bln) at market prices
(Recasts, updates throughout)
By Daniel Fineren and Adveith Nair
LONDON, Feb 23 (Reuters) - Centrica (CNA.L), Britain’s biggest household energy supplier, has signed its first long-term contract to buy liquefied natural gas from the world’s biggest LNG exporter, Qatar.
Qatargas is to deliver 2.4 million tonnes a year for the next three years to the Isle of Grain terminal near London under a deal worth about 2 billion pounds ($3.24 billion) at current UK market prices, said Centrica, which owns British Gas.
The 4 million therms of gas to be delivered could meet a tenth of total UK annual residential gas demand and a quarter of British Gas sales, Centrica said. That’s enough to supply around 2.5 million households.
“It’s a strategically important deal for the UK. It’s the first time we have been able to buy term LNG supplies at Centrica for the UK,” Mark Hanafin, managing director of Centrica Energy, told journalists in a conference call from the Qatari capital Doha.
“As domestic supplies of gas begin to dwindle in the North Sea, this is a very important deal for UK energy security ... We have been buying (LNG) literally month to month. This is securing supplies for the next three years,” Hanafin said after the deal was signed in the presence of UK Prime Minister David Cameron. [ID:nLDE71M0Y6] Qatargas is already Britain’s biggest LNG supplier through its South Hook import terminal in Wales, and the contract to supply Britain’s biggest energy retailer boosts the small Middle Eastern country’s share in Europe’s biggest gas market.
“This deal represents the establishment of a new relationship with Centrica, and further underlines Qatargas’ commitment to the UK as one of our key gas markets,” Qatargas Chief Executive Khalid Bin Khalifa Al Thani said.
Britain expanded its LNG receiving capacity last year, largely to reduce dependence on gas from the North Sea, and has steadily increased imports of the liquefied fuel which is warmed back to gas before being pumped into the network.
LNG terminals have pumped record quantities of fuel into Britain in early 2011, meeting more than a third of UK gas needs at times. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Graphic showing LNG share of UK demand vs Norway pipe gas
since January 2010: link.reuters.com/vez97r
since October 2010: link.reuters.com/kab28r Graphic showing LNG share of daily UK gas demand:
link.reuters.com/waz97r See Factbox on Qatari LNG facilities [ID:nLDE68S0CI] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
The first gas under the new contract is expected to be delivered in June. Centrica expects tankers delivering the contracted gas to fill about half of the 70 berthing slots a year it has at the terminal near London.
The company was unable to say which of Qatargas’ huge production lines, known as trains, the fuel would come from.
The actual price paid for the gas over the next three years will depend on how the UK NBP gas market prices develop and, unlike some Qatari sales deals to Asia, it will not be tied to oil prices.
“It’s not an oil-indexed deal ... it will be priced on the UK NBP index,” Hanafin said. “It’s a competitive price for us.”
Centrica, which reports full year results on Thursday, is expected to post a pretax profit of 2.04 billion pounds, on revenue of 21.82 billion pounds, according to a Thomson Reuters I/B/E/S poll.
Shares in the company were up 0.44 percent at 340.2 pence at 1319 GMT on Wednesday on the London Stock Exchange.
Additional reporting by Regan Doherty in Doha; Editing by Jason Neely