--Centrica moves to North American gas supply
--Supply expected to start in 2018
--U.K. seeking natural gas supply diversity
(Updates with details)
By Cassie Weber and Ben Lefebvre
Centrica PLC (CNA.LN), 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 Partners LP (CQP) 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 a
million British thermal units since October 2011, compared with the
current $10 a million British thermal units 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.
Write to Cassie Werber at cassie.werber@dowjones.com and Ben
Lefebvre at Ben.Lefebvre@dowjones.com
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