Centrica signs £2bn gas deal with Qatar

Centrica signed the UK's first long-term liquefied natural gas (LNG) contract with Qatar yesterday, to coincide with a trade mission to the Gulf led by Prime Minister David Cameron.

Under the deal, signed in the Emir's palace in the presence of Mr Cameron and Sheikh Hamad bin Khalifa al-Thani, the British energy giant will import 2.4 million tons of LNG into the Isle of Grain terminal in Kent each year for the next three years.

The contract has a total value of £2bn, using the current gas price, and represents about 10 per cent of the UK gas market, enough to heat 2.5 million homes.

Centrica said the deal is groundbreaking because it is Britain's first ever long-term LNG supply contract. In the past, the company has bought only on a short-term "spot" basis.

It is also vital to efforts to strengthen the UK's energy security as home-grown supplies from the North Sea continental shelf begin to dry up.

"As domestic supplies of gas begin to dwindle, this is an important deal for UK energy security and for our customers," Mark Hanafin, the managing director of Centrica Energy, said. "The important thing is that where we were buying literally month-to-month, now we have secure supplies for three years."

Centrica said that support from the UK Government was an "important factor" in securing the deal, which will be priced according to the UK's wholesale gas market price – the so-called national balancing point (NBP) – rather than linked to the oil price. Although the deal is valued at £2bn at today's prices, the cost may fluctuate as the market price moves.

Mr Hanafin denied suggestions that reliance on the turbulent Middle East region could expose the UK's energy supplies to greater risk, stressing the stability of the regime in Qatar and the company's diversification strategy, including investments in upstream resources in the North Sea, international expansion and move into nuclear and renewable generation.

"We are not taking a risk with UK energy supplies, quite the opposite – this is building up our energy security," Mr Hanafin said. "This is a deal between the largest gas exporter and Europe's largest market."

The UK is already feeling the impact of slowing North Sea oil and gas production. Last year, around half of the UK's gas supplies were imported. But by 2015, imports will rise to two-thirds of UK gas needs, and to four-fifths by 2020. But Centrica is still committed to the region, the company confirmed yesterday. Last year, the group added another 29 million barrels to its reserves with the £144m boost to its stake in the Norwegian Stratfjord field, and in 2009 it spent £1.3bn to buy Venture Production, which specialises in the region.

The company will also continue to evaluate declining "orphan" fields which are no longer economic for the oil majors. "We are looking at every orphan field to make sure we are getting every last drop out of them," Mr Hanafin said.

Centrica expects controversy today when it publishes annual results showing booming profits at the British Gas retail division while householders struggle with rising costs. The group's defence will stress that the majority of the profits were from the first half of the year, and that it needs an extra-strong balance sheet to make the £40bn-worth of forward contracts that secure the country's gas supplies.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Ashdown Group: Training Coordinator - Financial Services

£32000 - £38000 per annum + benefits: Ashdown Group: A highly successful, inte...

Recruitment Genius: Business Development Executive - Affiliates & Partnerships

£20000 - £35000 per annum: Recruitment Genius: This multi-award winning foreig...

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor