Centrica signs gas deal with Devon

Centrica Energy, the trading arm of UK-based Centrica, has entered into a natural gas sale and purchase agreement (SPA) with US shale producer Devon Energy. The agreement was mentioned by Devon on its second-quarter earnings call earlier in August, without naming the buyer, and has now been confirmed by Centrica in an August 15 announcement.

Centrica said Devon had agreed to supply 50,000mn British thermal units (1.4mn cubic metres) per day of gas to the company over a 10‑year term starting in 2028. This is equivalent to five LNG cargoes per year, Centrica noted. The volumes will be indexed to European Title Transfer Facility (TTF) gas hub price.

Centrica said the SPA supported its objective of managing market price risk in its LNG portfolio by aligning feed gas pricing with European gas prices. At the same time, it said the deal will provide Devon with international price exposure.

The physical volumes supplied under the deal in the US will be handled and optimised by Centrica Energy’s US subsidiary, which has recently announced the opening of an office in New York according to the company. Centrica also noted that the deal follows similar agreements made over recent years, which it said demonstrates the company’s “innovative approach” to building partnerships and growing its LNG and trading business.

“Gas remains an essential transition fuel and, through long-term agreements like this, Centrica ensures competitively‑indexed gas supply for our LNG business and builds on the deep and important energy trade links between the US and the UK,” stated Centrica’s group CEO, Chris O’Shea.

The announcement on the deal with Devon came a day after Centrica said it had agreed to acquire the Isle of Grain LNG import terminal in the UK in partnership with Energy Capital Partners from National Grid for an enterprise value of GBP1.5bn ($2bn).