Centrica buys 20 years of gas supplies from the US as cold weather and snow continue to disrupt power in UK

Lack of gas storage facilities has led to low fuel reserves

Lucy Tobin@lucytobin
Monday 25 March 2013 14:36

Centrica, the owner of British Gas, today signed a £10 billion deal to buy gas from the United States to power 1.8 million British homes each year for two decades, in a deal the Government hopes will help keep the country’s lights on.

As Britain shivers in the cold snap, this country’s gas supplies are forecast to run out as soon as next month, as a combination of the lingering freezing weather, the UK’s North Sea gas fields running out and a lack of gas storage facilities has led to low fuel reserves.

Suppliers may be forced to pay higher prices for fuel imports from Norway and Russia as a result.

Now Centrica hopes its deal with Delaware’s Cheniere Energy Partners will help secure future supplies: the energy giant is paying to bring in 89 billion cubic feet of liquefied natural gas each year, via huge ships from the Sabine Pass liquefaction plant in Louisiana in the US to the Isle of Grain in Kent.

However, the first gas shipments are not due until September 2018 and the industry has warned of the impact of shortages. Last week Ian Marchant, boss of Centrica’s rival SSE, warned “there is a very real risk of the lights going out” in Britain, saying the government was significantly underestimating the scale of the capacity crunch and warning the country could face electricity blackouts within three years.

Just last month Centrica, which is Britain’s biggest supplier with 16 million customers, pulled out of plans to build Britain’s first new nuclear plants in a generation.

It claimed spiralling costs and Government delays made it too difficult to build a fleet of plants starting at Hinkley Point in Somerset to secure future energy supplies. Instead of making that investment, Centrica handed back £500 million to shareholders.

Rather than invest in new power generators in the UK, the firm has signed foreign deals, including a £2 billion, three-year deal with Qatar to supply gas for 2.5 million households in 2011 and a new 10-year contract to pipe gas to the UK from Norway from 2015.

Prime Minister David Cameron said he “warmly welcome[d]” the US tie-up, adding: “Future gas supplies from the US will help diversify our energy mix and provide British consumers with a new long-term, secure and affordable source of fuel.” Energy Secretary Ed Davey added: “Security of UK energy supply lies in diversity so I am pleased. The UK already receives gas from a range of countries and we can now add the US to Norway, the Netherlands and Qatar as sources of supply.”

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