U.S. Devon Energy Corporation has signed a 10-year natural gas agreement to supply LNG to UK’s Centrica, the owner of British Gas.
Under the deal announced on Friday, Devon Energy will supply 50,000?(MMBtu) per day of natural gas over a 10?year term starting in 2028. This is equivalent to five LNG cargoes per year.
The LNG volumes will be indexed to the European gas hub price, TTF.
The agreement supports Centrica’s objective of managing market price risk in its LNG portfolio by aligning feed gas pricing with European gas prices whilst providing Devon Energy with international price exposure, the UK company said in a statement.
“Gas remains an essential transition fuel and, through long-term agreements like this, Centrica ensures competitively indexed gas supply for our LNG business and builds on the deep and important energy trade links between the US and the UK,” said Chris O’Shea, Group Chief Executive of Centrica.
The physical volumes of this deal in the U.S. will be handled and optimized by Centrica Energy’s U.S. subsidiary that recently announced the opening of an office in New York.
The agreement with Devon is not the first with a U.S. producer for Centrica. At the end of last year, Centrica signed a similar deal with Coterra Energy, under which the U.S. gas producer will supply 100,000 MMbtu/d of natural gas linked to European gas prices such as TTF and NBP, for a period of 10 years, commencing in 2028.
The announcement of the agreement with Devon Energy follows Thursday’s communication from Centrica that it has partnered with investment firm Energy Capital Partners LLP to buy the UK’s largest LNG import terminal at the Isle of Grain for an enterprise value of $2 billion (£1.5 billion).
Part-owning Grain LNG is in line with Centrica’s strategy of investing in critical energy infrastructure assets, aligned to the energy transition that deliver attractive returns, regulated or contracted cash flows, and create future options across the company’s broader portfolio, the British Gas owner said.
By Tsvetana Paraskova for Oilprice.com
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