E.ON confirms Canada LNG deal, denies plans to cancel Gazprom contracts
BY HENDRIK VARNHOLT AND JAN HROMADKO
DÜSSELDORF -- E.ON said Monday it has reached an agreement with Canada's Pieridae Energy involving the delivery of liquefied natural gas, or LNG.
The deal is the German utility's first move to take advantage of huge amounts of inexpensive shale gas flooding the North American market. It also is an effort to further diversify its gas sources. The company's largest gas suppliers are Norway and Russia.
E.ON didn't disclose the exact financial details of the agreement, but it said the deal is worth several billion euros per year and is set for a period of 20 years, starting in 2020.
E.ON also said the agreement is for around 5 MMmt of LNG per year during the contract period. The company's comments confirmed a report by The Wall Street Journal, which earlier Monday reported the agreement.
The deliveries will start following the completion of an LNG terminal in Goldboro on Canada's east coast, which is planned to be finished in the first quarter of 2020.
The terminal will handle a yearly volume of around 10 MMmt of LNG, which will be pumped onto ships for export.
Separately, E.ON Chief Executive Johannes Teyssen on Monday denied media reports over the weekend that the company is considering to cancel all of its gas supply contracts with Russian export monopoly Gazprom, one of its largest suppliers.
"Reports that we want cancel our gas supply contracts with Gazprom are absurd," Mr. Teyssen said on the sidelines of an industry conference in Bologna, Italy.
E.ON has no reason to question Gazprom's reliability as gas supplier, he added.
Russian gas is generally considered as relatively expensive, because much of the long-term gas contracts, which utilities like E.ON have struck with the Russian producer, are linked to the price of oil.
However, following years of talks with Gazprom, E.ON last year managed to secure better terms for its Russian gas, including compensation for previously loss-making contracts.
Compared with European prices, North American gas trades much lower as shale gas has become abundant thanks to production techniques known as hydraulic fracturing, or fracing.
Dow Jones Newswires