U.S.-based Devon Energy Corporation has finalized a significant agreement to supply liquefied natural gas (LNG) to Centrica, the owner of British Gas, for a term of ten years. The deal, announced on March 15, 2024, entails the provision of 50,000 MMBtu of natural gas per day, commencing in 2028. This volume is estimated to equate to approximately five LNG cargoes each year.
The agreement links the LNG supply to the European gas hub price, specifically the Title Transfer Facility (TTF). This structure aims to assist Centrica in managing market price risks within its LNG portfolio, while simultaneously offering Devon Energy exposure to international pricing dynamics. In a statement regarding the deal, Chris O’Shea, Group Chief Executive of Centrica, emphasized the importance of gas as a transitional fuel, stating, “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 U.S. and the U.K.”
Strategic Ventures and Investments
Centrica’s U.S. subsidiary will oversee the physical volumes associated with this contract, bolstered by the recent establishment of a new office in New York. This agreement is not Centrica’s first collaboration with a U.S. gas producer. In late 2023, the company entered into a similar arrangement with Coterra Energy, which will supply 100,000 MMBtu per day of natural gas linked to European gas prices, including TTF and the National Balancing Point (NBP), also starting in 2028.
The timing of the announcement coincides with Centrica’s recent partnership with investment firm Energy Capital Partners LLP to acquire the U.K.’s largest LNG import terminal located at the Isle of Grain. This transaction carries an enterprise value of $2 billion (approximately £1.5 billion). Centrica’s involvement in Grain LNG aligns with its strategy of investing in critical energy infrastructure assets. The company aims to ensure attractive returns, regulated or contracted cash flows, and the creation of future options across a broader portfolio as part of its commitment to the energy transition.
This latest agreement underscores a broader trend in the energy sector, where companies are seeking to strengthen supply chains and optimize pricing mechanisms amid evolving market conditions. As global energy demands fluctuate, the strategic partnerships formed by firms like Centrica and Devon Energy reflect an increasing focus on reliability and sustainability within the energy landscape.
