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Gas Deal Worth £2 Billion Signed between UK and Qatar

Qatar : 30 April 2011

The British liquefied natural gas (LNG) markets have been stabilised thanks to a deal between Qatar, the largest LNG exporter in the world, and the UK.

Last week’s agreement will see QatarGas supply the UK energy firm Centrica and should cover 10 percent of gas demand in the United Kingdom, based on a statement from QatarGas. British PM David Cameron signed the deal while visiting the Middle East last week.

The deal covers a supply of 2.4 million tones of LNG shipped annually and is worth Dh 12.12 billion or about £ 2 billion at today’s market prices.

Chief executive at Centrica Sam Laidlaw noted that the relationship between the UK and Qatar is more important now as the energy firm relies increasingly on LNG imports to supply the UK market.

Over half of the total LNG demand in the UK is supplied by imports. In an attempt to offset the dwindling North Sea field’s supply, the nation is adding more capacity to receive LNG.

From Qatar, the PM stated that this deal would be positive for Britain as a nation, for jobs and economic growth with the UK, and for energy security within the country.

The contract extends for three years and should go a long way towards reassuring the UK markets that are concerned with the world’s gas supply due to the recent events in Japan. After the earthquake and tsunami that occurred in March knocked out electricity production in the Fukushima nuclear plants, Japan has been increasing its gas imports in a bid to catch up to demand.

In the wake of the Fukushima crisis and disaster the level of UK gas prices in general has risen. This is due to expectations of gas being diverted from Europe and the UK to Japan, stated energy economist Douglas Caskie. Caskie works with Abu Dhabi’s Western Region Development Council.

He noted that this LNG deal would go a long way to calm the UK market and likely soften the prices. The uncertainty over supplies in the period beyond Fukushima will decrease and gas prices will be moderated in the UK over the coming months.

Currently around 15 percent of the overall gas demand in the UK is covered by Qatar. QatarGas stated that the coverage would extend to 50 percent by the year 2025.

The Minister of Energy in Qatar, Dr Mohammed al Sada, noted that this new agreement is the next milestone in the energy relationship between the two nations. The minister added that Qatar is eager to support the energy requirements of the UK.

Al Sada reiterated his country’s commitment to deliver LNG to Britain in a reliable and efficient way. The supplies involved in the current deal will likely originate from the multi-billion (US $ 8 billion or Dh 29.38 billion) QatarGas 4 plant what liquefies natural gas for overseas shipment.

The UK’s energy major, Royal Dutch Shell, holds a 30 percent stake in the plant that has the LNG processing ability to handle 7.8 million tonnes annually from the North Field in Qatar.

As well as supplying the US and Dubai, this plant also exports to India and China. Both of those markets are viewed as competitors to the western markets vying for worldwide gas resources.

Qatar is on the tail end of an aggressive push for infrastructure expansion aimed at higher gas processing.

Expectations for the nation’s LNG exports see growth of around 13.5 percent per year until 2015, based on the US Energy Information Administration. Beyond that time growth is forecasted to decelerate to around 2.1 percent annually.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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