Centrica, the holding company for British Gas, will buy 1.75 million metric tons a year of liquefied natural gas from Cheniere Energy Inc.’s Sabine Pass plant in Louisiana, the Windsor, UK based company said today.
Prices will be linked to Henry Hub, the U.S. benchmark gas prices, and deliveries will start in September 2018.
The deal shows the U.S.’s emergence as a natural gas exporter after fracking technology created a glut of fuel, sending prices to decade lows. In contrast, U.K. gas prices spiked to a seven-year high last week after a fault on the Belgian pipeline, raising concern that Britain is vulnerable to supply shortages as indigenous production slumps.
The current setup is a three-year LNG contract with Qatar Liquefied Gas Co, signed with Centrica in February 2011 for 2.4 million tons of the fuel annually. QatarGas, as the company is known, is the world’s biggest LNG producer.
With this contract expiring in 2014, it still leaves the UK with a 4 year time span of no LNG contracts. LNG can be brought on the spot market, however this period is likely to see the UK heavily reliant on pipelines with Norway and the continent.