Centrica selected as a partner in Canvey LNG project

Centrica plc today announced it has become a partner in the Canvey LNG project, which proposes to convert an existing liquefied petroleum gas (LPG) terminal at Canvey Island, Essex, into a liquefied natural gas (LNG) receiving facility. Subject to planning consent and a decision to construct, Centrica would hold 20 per cent equity in the facility, together with capacity rights enabling it to deliver LNG to British Gas customers from a range of international sources.

The Canvey LNG project, led by Calor Gas and including LNG Japan as a partner, commenced in December 2004, with a feasibility study to develop a 5.4 billion cubic metre (bcm) strategic LNG import and regasification facility at the existing Calor LPG terminal, which would be capable of meeting 5 per cent of the UK’s annual gas demand. Following the study, Centrica has been selected as a partner, with a full scale planning application and project plan now in development.

As a ‘brownfield’ project, an operational facility at Canvey would see significant cost savings compared to a greenfield site. Centrica’s share of pre development costs would be in the region of £1 million.

Canvey delivered Britain’s first ever LNG supplies in 1964 and during its operational lifetime received over 900 LNG cargoes. The proposal to convert the site includes construction of two LNG storage tanks, reinforcement of the existing jetty and a new connection to the National Transmission System. Subject to planning approval, a decision to progress to construction is expected by the end of 2006, with completion around the end of the decade.

The project is one of a small number of proposed or planned regasification projects within the UK. Centrica’s participation is part of its strategy to have an interest in key stages of the gas chain. It intends to procure future supplies for its British Gas customers from a range of international sources, including LNG through contracts and investments in equity projects. In March, Centrica signed a 20 year agreement to acquire regasification capacity at the new Isle of Grain terminal in Kent, providing access to a potential annual volume of 3.4 bcm of LNG from late 2008. A landmark 15 year deal signed in August 2004 with Petronas is expected to provide an annual 3 bcm to British Gas commencing between 2007-2008.

Sir Roy Gardner, Chief Executive of Centrica, said: “Participation in the Canvey project underlines our commitment to invest at key stages of the energy chain to secure future supplies for our British Gas customers.

“This agreement gives Centrica the opportunity to participate in one of the few planned or proposed regasification projects in the UK. In line with our strategy of sourcing supplies from a range of international areas, an operational project at Canvey would provide a gateway to import gas into the UK, as well as the opportunity to deliver value from overseas equity projects.”