Centrica and Delfin in $8.4B LNG Deal

Centrica and Delfin in $8.4B LNG Deal
Centrica and Delfin Midstream Inc have announced the signing of a heads of agreement.

Centrica and Delfin Midstream Inc have announced, in a joint statement, the signing of a heads of agreement for the purchase of one million tons per annum of LNG for 15-years on a free on board basis at the Delfin Deepwater Port.

The deal, which is said to be worth $8.4 billion (GBP 7 billion), provides Delfin with another key foundation customer which will facilitate a final investment decision for the first floating LNG export facility in the U.S. by the end of this year, with operations expected to commence in 2026, the statement noted.

The statement also highlighted that Centrica has been working to bolster the UK and Ireland’s energy security both now and over the longer term, “against a challenging geopolitical and macroeconomic environment”. Earlier this summer, Centrica signed a $4.8 billion (GBP 4 billion) supply agreement with Equinor to supply 4.5 million UK homes through to 2025, the statement pointed out.

“Natural gas has now been recognized as an essential transition fuel on the path to net zero just at the point geopolitical uncertainty is impacting the global gas market,” Chris O’Shea, Centrica’s group chief executive, said in the joint statement.

“Additional U.S. gas export capacity will help increase UK, European and global energy security, reflecting the increasing importance of LNG in the global gas supply chain. I’m delighted to sign this heads of agreement with Delfin as we continue to deliver our new strategy, growing Centrica’s LNG portfolio and ensuring that we increase our access to a diversified range of reliable gas supplies for our customers,” he added.

Dudley Poston, the CEO of Delfin, said, “we are very pleased to enter into this agreement with Centrica and continue to rapidly advance Delfin’s position as a leading source of reliable low-cost energy from the safety of the U.S. at compelling prices”.

“Market demand for long-term LNG continues to be strong and buying activity from Europe and various other geographies has accelerated over the past few months. As a modular project that can make FID in 3.5 MTPA increments, this agreement materially advances our first vessel’s path towards FID later this year,” Poston added in the joint statement.

Also commenting on the deal, Kwasi Kwarteng, the UK Secretary of State for Business and Energy, said, “a key component of our Energy Security Strategy is that natural gas is a key transition fuel on the road to clean, affordable, home-grown energy”.

“From renewables to nuclear, we have ambitious plans for greater energy independence, but we are also realistic about our energy needs now and in the years ahead. That means we need to secure more diverse and reliable sources of natural gas from friends, allies and strategic partners,” he added.

“[The] deal between Centrica and Delfin is positive news for the UK, helping to ensure our diversity of supply from reliable sources - like our friends in the United States - for many years to come,” Kwarteng continued.

Back in June, Centrica and Equinor announced a “major” agreement to deliver an additional one billion cubic meters of gas supplies to the UK for each of the next three winters. Centrica will now buy a total of 10 bcm of gas per year from Equinor, Centrica highlighted, describing the figure as “a material part of the UK’s typical yearly gas demand”.

In July, Delfin announced that it had finalized a binding LNG sale and purchase agreement with Vitol Inc. In addition to the SPA, which will see Delfin will supply 0.5 million tons per annum on a free on-board basis at the Delfin Deepwater Port to VIC for a 15-year period, Vitol also revealed that it had finalized a strategic investment in the company.

To contact the author, email andreas.exarheas@rigzone.com


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