Centrica plc has today announced that its subsidiary British Gas Trading Ltd and Dutch company N.V. Nederlandse Gasunie have reached agreement on a major long term UK natural gas import contract.
Gasunie has been contracted to deliver 80 billion cubic metres of gas to the UK over a 10 year period. The agreement, which is linked to UK gas prices could represent a value of £5.3 billion (Euros 8 billion) over the life of the contract.
Gasunie said today the transportation route for the gas is still being studied, but is likely to result in an additional pipeline being built linking the UK and the Continent. Depending on the infrastructure, the gas is expected to come on stream as early as 2005.
The contract follows Centrica’s first long-term European supply contract announced with Statoil earlier this month. The Gasunie agreement, to deliver 8 billion cubic metres of gas per year, equates to 18 per cent of Centrica’s current demand. Together, the Gasunie and Statoil contracts will meet about 30 per cent of Centrica demand, more than 10 per cent of current UK demand.
Sir Roy Gardner, Chief Executive of Centrica, said: “Our agreement with Gasunie marks another very significant step for Centrica following our earlier agreement to bring gas to the UK from the Norwegian Continental Shelf. We are particularly pleased as this secures stable supplies for our customers for the foreseeable future that are linked to UK market prices. It is also good news for UK plc, encouraging development of additional transportation infrastructure to meet the nation’s gas demand.”
Under the agreement, Gasunie will deliver a higher volume in the winter months (approximately 5 billion cubic metres) and a lower volume in the summer months (approximately 3 billion cubic metres). Together with current agreements, this will boost Gasunie’s exports to almost 50 billion cubic metres per year.
Gasunie has been investigating the potential for exports to the UK for some time as demand for gas is expected to exceed current supplies over the next few years. This one contract would make the UK one of Gasunie’s biggest export markets. George Verberg, Chief Executive of Gasunie, said: “We are very satisfied with this long-term agreement. We are proud to have British Gas as a customer and to play a positive role in the security of supply of the United Kingdom. For us it is also a successful way of coping with our loss of market share due to the effects of liberalisation in our country. Moreover, it underlines the strategic position of Gasunie and The Netherlands in terms of a stable reserves position, high level of flexibility and central location between the large Western European gas markets.”