Centrica Buys Dutch Gas for the U.K.

Centrica made its second European buy-in deal this month, preparing the United Kingdom for net gas imports by 2005. The deal boosts the prospects of a UK-Netherlands undersea pipeline connector and the commercial prospects for Dutch gas, making the UK one of Gasunie's biggest export markets as physical and political barriers to gas trading come down across the continent. Through its British Gas Trading arm that bills about 70 percent of Britain's gas customers, Centrica said it had agreed for Gasunie to deliver eight billion cubic meters of gas a year for 10 years. Together with a five billion cubic meter per year contract agreed with Statoil earlier in June, the imports will satisfy more than 10 percent of current UK natural gas demand. Centrica said the contract linked to UK gas prices could be worth 5.3 billion pounds ($7.95 billion) over the 10-year life of the contract.

"This secures stable supplies for our customers for the foreseeable future," said Chief Executive Roy Gardner. "It is also good news for UK Plc, encouraging development of additional transportation infrastructure to meet the nation's gas demand." Statoil already has the infrastructure to deliver gas into Britain from the north. Even though further to the south the English and Dutch coasts are latticed with pipes between Great Yarmouth and Ijmuiden, there is no interconnector linking massive Dutch fields to the UK's coastal terminal at Bacton, where gas from Belgium already arrives. According to industry officials, during the 1980s as much as 20 percent of UK gas demand was fulfilled by Norwegian supplies. In more recent years the UK has been more self sufficient, but gas demand has risen sharply in the past 20 years and UK offshore production is now peaking.

Gasunie, once a Dutch monopoly, is set to be split between the Dutch state, which will take over the transport operations, and Royal Dutch/Shell and ExxonMobil, which will divide up commercial operations.