September 20, 2012 / 6:51 PM / 7 years ago

UPDATE 1-UK's Centrica inks 3-year gas supply deal with Gazprom

MILAN, Sept 20 (Reuters) - British utility Centrica on
Thursday signed a 2.4 billion cubic metre, three-year gas supply
deal with the UK arm of Russian export monopoly Gazprom
, it said in a statement.
    Gas deliveries will begin from 2014 and will be entirely
priced against the UK's freely traded spot gas market, the
National Balancing Point (NBP), Centrica said in a statement.
    The deal marks Gazprom's longest ever gas supply contract
that is not linked to the price of oil, a Gazprom source told
Reuters.
    Gazprom Marketing and Trading, the UK arm of the Russian
parent, will deliver gas to Britain through a sub-sea pipeline
from Belgium, the source added.
    The practice of linking supplies of gas to the price of oil
has hurt Gazprom's European customers over the past few years
because they are forced to sell the gas at a loss, costing them
billions of euros in the process.
    The backlash against oil-linked contracts has gained ground
in recent years as waning demand for gas and economic recession
across Europe forces utilities to defend dwindling profit
margins. 
    In response to growing criticism over oil-indexation, the
European Commission last week launched an investigation into
suspected anti-competitive practices by Gazprom, adding to
tensions between Europe and Moscow over energy policy.
 
    "Centrica is at the forefront of helping to deliver UK
energy security and this deal is a natural fit with one of the
world's largest gas producers and exporters," Cordi O'Hara,
Centrica Energy origination director, said in a statement.
    The deal with Gazprom follows a string of supply deals for
Norwegian gas and Qatari liquefied natural gas (LNG) last year.
    Centrica clinched a 10-year, 50 billion cubic metre supply
deal with Norway's Statoil in November 2011, starting in 2015,
and a major LNG contract with Qatar in February of the same
year.
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