Centrica strikes $8bn deal to import more gas from US

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Centrica has struck a major deal to import more gas from the US, in a move that the British Gas owner said would boost the UK’s energy security.

The company said it had agreed to buy 1mn tonnes a year of liquefied natural gas (LNG) for 15 years from Delfin Midstream, which is building a new export terminal near Louisiana. 

Centrica said the deal was worth $8bn at today’s prices and, when imports start, expected to be from 2027, could provide enough energy to heat 5 per cent of UK homes for 15 years.

The US has become an increasingly important supplier of gas to Europe after cuts in supplies last year following Russia’s invasion of Ukraine. 

The deal is the latest attempt by the British Gas owner to position itself as a leader in bolstering the UK’s energy security, having signed long-term pipeline supply and LNG deals with Norway and reopened the Rough storage facility under the North Sea in the past 18 months. 

Centrica’s commitment to bolstering LNG supplies also marks a significant reversal from before the energy crisis, when the company had looked to offload another major US LNG deal it had first signed in 2013 after gas prices fell sharply during the pandemic.

However, it retained the contracts as the energy crisis started in late 2021 before intensifying after Russia openly weaponised gas supplies to Europe following its invasion of Ukraine. 

The company’s marketing and trading division has grown in prominence during the crisis, earning £1.4bn in adjusted operating profit in 2022 compared with £70mn the year before. 

While the company has publicly focused on the ability of LNG to help support gas imports into the UK, cargoes of the super-chilled fuel can also be sent to other destinations depending on market conditions. 

Traders in the UK have also helped utilise the country’s excess LNG import capacity to bring in cargoes that are then sent on through pipeline to continental Europe during the summer months, as the EU has much greater storage capacity. 

While the UK still gets about 50 per cent of its gas from domestic sources, its dependence on imports is expected to rise in the coming years as output from the North Sea declines. 

While the UK has a binding target to cut emissions to net zero by 2050, the vast majority of homes are still heated by natural gas, and decarbonising heating is viewed as one of the biggest challenges for the government. 

Natural gas may still form a significant part of the UK’s energy mix as the country attempts to decarbonise, as it can be converted into low emission hydrogen if combined with carbon capture and storage. 

Still, European utilities have been more hesitant than Asian buyers to sign very long-term LNG deals, generally preferring a duration of about 15 years while China has inked a number of contracts lasting longer than 25 years.