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UK: South Hook LNG covers its options

TOTAL'S 25-year deal to provide regasification services at Qatar Petroleum's recently opened South Hook liquefied natural gas (LNG) import facility is the world's first such agreement. South Hook is Europe's largest terminal and capacity is set to double in the next few weeks to 15.6m tonnes a year (t/y) – or around 21bn cubic metres a year (cm/y).

Total has an 8.35% stake in the plant at Milford Haven, Wales, which is contracted to take all the production from the two-train 15.6m t/y Qatargas 2 project. However, the services agreement will also allow Total to source LNG supplies from other projects to ensure South Hook is operating at capacity.

Rashid Al-Marri, South Hook Gas' general manager, described the latitude afforded by the deal as "innovative", saying it would "help to maximise use of the South Hook terminal and increase the opportunity for LNG deliveries to the UK".

South Hook Gas, which owns and manages the plant's regasification capacity as well as UK transmission-system entry capacity, is a joint venture between Qatar Petroleum (70%) and ExxonMobil (30%). Qatargas 2 and ExxonMobil Gas Marketing Europe have both signed 25-year sales and purchase agreements with the terminal for LNG input and gas output respectively. The South Hook terminal itself is owned by Qatar Petroleum (67.5%), ExxonMobil (24.15%) and Total Gas & Power (8.35%).

The terminal began commercial operations in October and can supply around 10.5bn cm/y of gas to the UK, representing about 10% of domestic demand. Two further storage tanks, due to come into operation in the second phase of the project, will double import capacity during first-quarter 2010. Uneven supply during the commissioning process caused a temporary fluctuation in UK grid supplies in mid-December, before output was quickly returned to normal.

Its deep-water harbour has made Milford Haven a magnet for oil and gas importers for decades and is ideal for Qatar's new generation of Q-Flex (216,000 cm) and Q-Max (266,000 cm) LNG carriers – the latter provide 80% more capacity than conventional LNG carriers and use around 40% less energy per unit carried, because of economies of scale and the efficiency of the engines.

The smaller Dragon LNG terminal, another Milford Haven-based import facility, commenced commercial operations September 2009. With an initial capacity of 6bn cm/y, potentially rising to 9bn cm/y, Dragon is owned by BG Group (50%), Malaysia's Petronas (30%) and Dutch LNG specialist 4Gas (20%). BG and Petronas have agreed to take all of Dragon's capacity over 20 years.

Supply from both South Hook and Dragon are fed through the 315 km South Wales Gas Pipeline to join the national gas network in southern England.

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