Iberdrola to Import Gas From America -- Update

By Selina Williams 

Spanish utility Iberdrola SA and Houston-based Cheniere Energy Inc. have reached a nearly $5.6 billion natural-gas deal, as Europe looks to secure energy supplies and the U.S. pushes efforts to export gas amid tensions with Russia.

Supply worries have ratcheted up across the European Union as Russia and the West face off over Ukraine. The Russian state-run OAO Gazprom provides 30% of Europe's gas, around half of which flows through Ukraine.

Meanwhile, the boom in hydraulic fracturing, or fracking, has raised the prospect of the U.S. becoming a major gas exporter in the next decade. Washington is reviewing some two-dozen projects to export gas.

It will be a while before large volumes of gas from the U.S. start to cross the ocean. There is also no guarantee that Europe can depend on sustained deliveries of gas from the U.S. Over the past few years, Asian buyers have scrambled to import gas, raising prices.

So far, only one project--Cheniere's Sabine Pass export terminal in Louisiana--has received final approval from the U.S. government. It is expected to begin shipping liquefied natural gas, or LNG, by early next year. The Obama administration is also studying whether it should relax decades-old laws restricting oil exports.

Iberdrola's deal for U.S. gas would serve primarily customers in the U..K., plus some in Spain. The 20-year agreement, which starts in 2019, is for delivery of about one billion cubic meters of LNG a year, or enough to supply about 750,000 U.K. homes.

Under the agreement, U.S. natural gas would be liquefied at a plant in Corpus Christi, Texas, and then shipped to a gas import facility at the Isle of Grain in the U.K. Cheniere hasn't made a final investment decision about building the Texas export terminal, but expects to this year.

Cheniere already has deals to supply U.K. utility Centrica PLC, oil and gas company BG Group PLC and French oil major Total SA from its LNG terminal at Sabine Pass. Spanish utility Endesa SA said last month that it had also secured gas from Cheniere's proposed Corpus Christi plant.

Amy Harder and Alison Sider contributed to this article.

Write to Selina Williams at [e-mail]

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