Centrica plc has entered into an agreement with Cheniere Energy Partners, L.P, to purchase 91,250,000 mmbtu (89 billion cubic feet) of annual liquefied natural gas (LNG) volumes for export from the Sabine Pass liquefaction plant in Louisiana in the United States. This amounts to approximately 1.75 million metric tonnes per annum (mmtpa), and is the equivalent of the annual gas demand of around 1.8 million UK homes. The contract is for an initial 20 year period, with the option for a 10 year extension, and the target date for first commercial delivery is September 2018.

Under the terms of the agreement, Centrica will purchase LNG on a ‘Free on Board’ (FOB) basis, giving it destination rights for the cargoes, for a purchase price indexed to the Henry Hub natural gas price plus a fixed component. Centrica will export gas from the fifth LNG train at Sabine Pass, on which preliminary engineering work has already begun. The contract is subject to a number of conditions precedent, including Cheniere receiving the necessary regulatory approvals, securing finance, making a final investment decision and issuing a notice to proceed with the fifth LNG train.

Sam Laidlaw, Chief Executive of Centrica, said: “In an increasingly global gas market, this landmark agreement represents a significant step forward in our strategy, enabling Centrica to strengthen its position along the gas value chain and helping to ensure the UK’s future energy security. We are therefore very pleased to have signed this agreement and look forward to working with Cheniere.”

UK Prime Minister, David Cameron, said “I warmly welcome this commercial agreement between Centrica and Cheniere. Future gas supplies from the US will help diversify our energy mix and provide British consumers with a new long-term, secure and affordable source of fuel."

UK Secretary of State for Energy and Climate Change, Ed Davey, said “Security of UK energy supply lies in diversity so I am pleased that Centrica has announced today that it has secured a long-term North American liquefied natural gas export contract with Cheniere Energy Partners. The UK already receives gas from a range of countries and we can now add the US to Norway, the Netherlands and Qatar as sources of supply.”

Notes:
- Sabine Liquefaction is currently developing six liquefaction trains, each with nominal capacity of approximately 4.5 mmtpa, adjacent to the Sabine Pass LNG terminal. Sabine Liquefaction has commenced construction of the first two trains and expects to commence construction of the third and fourth trains in 2013. The permitting process and preliminary engineering have been initiated for the fifth and sixth trains.
- Under the terms of the agreement, Centrica will pay Cheniere a fixed fee of $3.00/mmbtu plus a commodity fee of 115% of the prevailing Henry Hub price, for the procurement and liquefaction of the gas.
- Centrica has the right to 5.8 billion cubic meters (bcm) (205bcf) of import capacity annually at National Grid’s Isle of Grain LNG terminal in Kent.

See the site of Sabine Pass LNG plant