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In a sign that the US government is slowly loosening its grip on the export of its cheap shale gas, the energy company Centrica has signed a new deal that will supply nearly two million homes in the UK within five years.
The deal could mark a new era in natural gas exported from the US which should see international prices fall. The UK will certainly benefit from the cheap imports as North Sea gas fields continue to decline rapidly, and gas from mainland Europe remains expensive.
The deal will see Centrica pay Cheniere £10 billion over 20 years for 89 billion cubic feet of gas each year, enough to heat 1.8 million UK homes. Cheniere was one of the first US companies to receive clearance from the federal government to export shale gas in the form of liquefied natural gas (LNG). The deal will see the first deliveries reach the UK by tanker in 2018.
Related article: Dow Chemical is Enthusiastic for Cheap Shale Gas
The deal will also protect the UK from price spikes caused by the current lack of sources. After a period of unseasonably cold weather UK gas reserves have been severely depleted, no danger was imminent due to the supplies from Norway and Russia, however, when a key pipeline failed on Friday morning, spot market gas prices immediately doubled, highlighting the vulnerable position that the UK occupies.
David Cameron, the British Prime Minister, announced, “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.”
Other deals between UK energy companies and US natural gas exporters have been made over the past two years, including BP and British Gas, but none on the scale of this latest deal.
By. James Burgess of Oilprice.com
James Burgess studied Business Management at the University of Nottingham. He has worked in property development, chartered surveying, marketing, law, and accounts. He has also…