UK signs £2bn Qatari gas deal

Qatar has signed a fresh deal to supply gas to the UK, adding a calming force to markets concerned about global supply following the nuclear accident in Japan.

Qatar has signed a fresh deal to supply gas to the UK, adding a calming force to markets concerned about global supply following the nuclear accident in Japan.

Qatar, the world's biggest liquefied natural gas exporter, has signed a deal to supply the UK, adding a stabilising force to British markets.

The agreement, signed last week between the emirate's QatarGas and the British energy company Centrica during a visit to the Middle East by David Cameron, the British prime minister, is expected to account for 10 per cent of British gas demand, according to a QatarGas statement.

With 2.4 million tonnes set to be shipped per year, the deal is worth about £2 billion (Dh12.12bn) at current market prices.

"The relationship between Qatar, the world's leading exporter, and the UK, is increasingly important as we become increasingly dependent on imported gas to supply our UK customers," said Sam Laidlaw, the chief executive of Centrica.

The UK has added more capacity to receive liquefied natural gas (LNG) to reduce its reliance on dwindling supplies from fields in the North Sea. It relies on imports for more than half of its gas demand.

The deal will be "good for Britain, good for our energy security, good for jobs, and good for economic growth," Mr Cameron said last week in Qatar.

The three-year contract is expected to reassure British markets that have been shaken by fears about global gas supply in light of new needs in Japan. The east Asian country has resorted to more gas imports to make up for electricity production losses from its Fukushima nuclear plants, where an earthquake and tsunami crippled three reactors on March 11.

"The general level of gas prices has been rising in the UK on the back of the Fukushima disaster because there was the expectation that gas would be diverted from the UK and Europe to Japan," said Douglas Caskie, an energy economist based in Abu Dhabi with the Western Region Development Council.

"What this deal does is it will calm the market sentiment in the UK and you will probably see a softening of prices. It will reduce supply uncertainty going forward post-Fukushima and it will also moderate gas prices in the coming months in the UK market."

Qatar already covers 15 per cent of total British gas demand and expects to grow that to 50 per cent by 2025, according to QatarGas.

"Qatar is keen to support the UK's energy requirements and this agreement is yet another important milestone in our mutual energy relationship," said Dr Mohammed al Sada, the Qatari energy minister.

"We are committed to efficiently and reliably delivering LNG to the UK." Supplies from the deal signed last week are expected to come from the QatarGas 4 plant, part of an estimated US$8bn (Dh29.38bn) facility that turns natural gas into a liquid so it can be shipped overseas.

Royal Dutch Shell, the British energy major, is a 30 per cent stakeholder in the plant, which can process up to 7.8 million tonnes of LNG a year from Qatar's North Field.

In addition to supplying Dubai and the US, the facility also ships to China and India - two of the emerging economies seen as a competitors to the West for global gas resources.

Qatar this year completed an aggressive drive to expand its infrastructure to process gas.

Its LNG exports are expected to grow by about 13.5 per cent annually until 2015, according to the US Energy Information Administration. After that growth is expected to slow to about 2.1 per cent each year.