UK seeks to secure more American LNG before winter sets in

UK seeks to secure more American LNG before winter sets in


The UK is trying to secure long-term supplies of liquefied natural gas from US producers as high energy prices across Europe threaten the economy far beyond just this winter.

The government’s energy supply task force is seeking proposals from LNG exporters to supply domestic buyers under deals lasting as long as 20 years, according to people familiar with the matter, who asked not to be named as the talks are private. The task force is being led by Madelaine McTernan, a former M&A banker who headed the UK’s vaccine group that procured Covid shots early in the pandemic.

A spokesperson for the Department for Business, Energy and Industrial Strategy declined to comment. Talks are still in early stages and it’s unclear who would pay for any gas cargoes.

It’s usual for governments to begin talks that lead to negotiations on a commercial level, such as the ones between Germany and Qatar. Britain’s inquiries come as other European nations are also trying to stock up on gas ahead of the coldest months and diversify their fuel sources in the long term. But unlike countries like Germany, the UK isn’t reliant on Russian gas, and instead taps its own output, Norwegian supplies arriving via undersea pipelines and LNG cargoes.

The competition for fuel still leaves Britain exposed to a Europe-wide supply crunch. The government on Wednesday, September 21, declared a plan costing an estimated £40 billion ($45 billion) that would cap wholesale prices for six months. Record-high costs this year have left households and businesses facing unaffordable utility bills, and with a recession looming.

The government’s LNG requests come six months after a visit by Kwasi Kwarteng to Washington, where he held initial meetings with US developers of LNG export facilities. Kwarteng was business secretary at the time, before being named chancellor of the exchequer under current Prime Minister Liz Truss.

Fred Hutchison, president of US industry lobby group LNG Allies, said: “Clearly the Truss government is engaged on this issue at the highest levels of government to lock in long-term supplies at affordable prices just like the Germans. The other European nations better step up pretty fast. What’s left in the United States is almost sold out.”

Britain’s private sector stepped up LNG procurement following Russia’s invasion of Ukraine. In June, UK utility Centrica plc signed a deal to buy extra gas from Norway’s Equinor ASA, and in August it reached an agreement to take LNG from US company Delfin Midstream Inc.

It’s not clear what volumes the UK government is trying to procure, but the sources said that officials are seeking to buy LNG indexed to the US benchmark Henry Hub gas price, and delivered on an ex-ship basis, where the seller must deliver the cargo to a fixed buyer and location.

For more information visit lngallies.com

27th September 2022