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Centrica signs deal for U.S. gas imports

LONDON -- Centrica, one of the U.K.' s main energy providers, has signed a deal to buy billions of cubic meters of liquefied natural gas from a U.S. plant, in the first deal clearly intended to bring gas from North America to the U.K.

The contract with Cheniere Energy will see Centrica import 1.75 million metric tons of gas per year for 20 years with an expected start date in 2018. That would be enough to power around 1.8 million U.K. homes, according to a statement by the firm. It is the first such deal between a U.S. supplier and a U.K. utility.

The contract is subject to Cheniere getting the necessary regulatory approval and securing financing before it becomes finalized. Cheniere would ship the gas from its proposed fifth processing unit, or train, at its Sabine Pass terminal in Cameron County, Texas, for which it applied for federal permits earlier this year.

In February, Centrica announced that it would not be participating in a plan to build new nuclear power stations in the U.K., and there has since been speculation as to where it will deploy the cash reserves on its balance sheet. In the company' s preliminary results statement the firm indicated that it planned to expand its North American business.

U.K. Prime Minister David Cameron welcomed the news, saying in the statement: "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."

Energy security in the U.K. "lies in diversity," according to Ed Davey, the U.K.' s Secretary of State for Energy and Climate Change, also quoted in the release. Mr. Davey noted that the U.K. is already supplied with gas from Norway, the Netherlands and Qatar.

Cheniere and other would-be U.S. natural gas exporters hope to benefit from the sharp increase in domestic natural gas supplies--and subsequent crash in prices--brought about by recent advances in drilling methods.

U.S. benchmark natural gas prices have been stalled below $4/MMBTU since October 2011, compared with the current $10/MMBTU in the U.K.

Cheniere already holds government permits necessary to export natural gas from the facility' s first two trains, now under construction and expected to start exporting in 2015 and 2016. It was the only company to receive such permits before the U.S. Department of Energy halted issuances while it studies the economic impact of exporting natural gas.

Dow Jones Newswires

03/25/2013

 

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