Centrica has signed up to purchase LNG from a new US supplier, working on an ambitious offshore project, in a move backed by Secretary of State for Business and Energy Secretary Kwasi Kwarteng.
Centrica signed the £7 billion heads of agreement (HoA) with Delfin Midstream for 1 million tonnes per year of LNG. The gas will be supplied for 15 years on a free on board (FOB) basis. Delfin will provide the LNG at the Delfin Deepwater Port, 40 nautical miles off Louisiana.
Delfin has not yet reached final investment decision on its floating LNG (FLNG) project. However, it expects to begin producing in 2026. The UK supplier predicts imports will begin that year.
© CentricaCentrica has also recently signed an agreement with Equinor, worth £4 billion. This involves the supply of an additional 1 billion cubic metres per year.
“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,” said Centrica CEO Chris O’Shea.
The executive said natural gas was an “essential transition fuel”.
Increments
Delfin CEO Dudley Poston said the deal with Centrica would help “rapidly advance Delfin’s position as a leading source of reliable low-cost energy from the safety of the US at compelling prices”.
The modular Delfin project “can make FID in 3.5mn tpy increments, this agreement materially advances our first vessel’s path towards FID later this year”.
Energy Secretary Kwarteng said natural gas would play an important part to providing “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.”
The UK needs to secure “more diverse and reliable sources of natural gas from friends, allies and strategic partners. Today’s 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.”
Delfin signed a sale and purchase agreement (SPA) with Vitol in July. This deal committed to the provision of 0.5mn tpy of LNG from the offshore FLNG project, running for 15 years.
The LNG producer has said it requires only 2-2.5mn tpy of firm long-term contracts to reach FID. The company has a permit to export up to 13mn tpy. Samsung Heavy Industries (SHI) and Black & Veatch having carried out front-end engineering and design (FEED).
Construction of a newbuild FLNG vessel will cost around $2bn, Delfin has said.
Feedstock for the project would come from onshore shale production, delivered by existing pipeline to the FLNG vessel.