Centrica strikes £1.5bn deal for Europe’s biggest gas import terminal

Isle of Grain terminal is capable of importing 15m tonnes of liquefied natural gas - John Lamb

Centrica has struck a £1.5bn deal for Europe’s biggest gas import terminal as it prepares for Britain to be increasingly reliant on costly foreign supplies.

The British Gas owner has partnered with American green energy fund ECP to acquire the Isle of Grain terminal in Kent, which is capable of importing 15 million tonnes of liquefied natural gas (LNG) a year.

The acquisition from National Grid signals Centrica’s expectation that the UK will ramp up LNG imports from the likes of the US and Qatar, particularly amid concerns over intermittent output from renewables such as wind and solar.

It will also make the Grain terminal one of the most important hubs for UK energy supplies, as its LNG import capacity is capable of supplying nearly a third of the nation’s energy supplies.

Centrica’s bet on LNG comes as part of a long-term shift in strategy, as the company has recently scaled back its oil and gas investments in the North Sea and taken a 15pc stake in the Sizewell C nuclear plant.

Chris O’Shea, Centrica’s chief executive, said: “The Isle of Grain terminal is a strategic asset that will support the UK’s energy security for many decades to come, keeping energy flowing reliably and affordably to households and businesses across the country as we transition to net zero.”Centrica’s chief Chris O’Shea says the Isle of Grain terminal ‘is a strategic asset’ - Dominic Lipinski/Bloomberg

Centrica said the Grain terminal was expected to generate earnings of around £100m a year until at least 2028, contributing annual dividends of £20m.

However, a spokesman said it will also explore turning the terminal into a power station fuelled by imported ammonia – essentially a form of liquefied hydrogen.

North Sea’s future

The investment will also raise questions over Rough, Centrica’s gas storage facility in the North Sea.

Mr O’Shea told The Telegraph last month that the business could close the loss-making site this winter without financial support from the government.

LNG is natural gas that has been cooled to -161C, turning it into a liquid that allows it to be transported around the world in ships.

The UK’s consumption of 75bn cubic metres of gas equates to 1,100 cubic metres per person, equivalent to the volume of 14 double-decker buses.

Two decades ago, the UK produced about 100bn cubic metres (bcm) of gas a year, but that has since plunged to 26 bcm amid higher taxes and the natural decline of the North Sea.

About 180 of the UK’s 280-odd offshore fields are now predicted to close by 2030, with gas output predicted to plummet to 12bcm in 2030 and just 6.5bcm by 2035 – when the country will still need up to 42bcm.

This means facilities like Grain will become the mainstay of the UK’s energy security.

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LNG is expected to play an increasingly important role in Britain’s energy mix over the long term, and is projected to meet around 60pc of the UK’s gas demand by 2050, compared to 15pc in 2024.

However, it will also make the UK increasingly reliant on the US, now the world’s leading LNG supplier.

Centrica is expected to invest £200m for a 50pc stake in the business, with the deal also made up of £1.1bn worth of debt.

Tyler Reeder, president of ECP, Centrica’s partner in the deal, said: “As one of the largest private owners of natural gas generation and infrastructure assets in the US, ECP has long understood that natural gas is indispensable to keeping grids resilient and advancing the transition to a lower-carbon future.

“With the emergence of the US as the global leader in low-cost LNG supply and the growing need for reliable natural gas supply across the UK and Europe, we believe Grain LNG will increasingly be relied upon as critical infrastructure to deliver dependable energy to local markets.”

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