SSE strikes 10-year contract with Shell

PUBLISHED: Feb 17 2012 @ 10:28 | Comments (0) | More info about Kenneth G. Mondero

British power company Scottish & Southern Energy (LSE:SSE) struck a deal with Shell Energy Europe for a 10-year supply of gas to commence in 2015.

This is the second supply agreement SSE has contracted for the past year, with the first one with Statoil being agreed in June 2011, which supplied 500 mcm annually for ten years This is planning to commence in the last quarter of 2012.

The agreement binds Shell to provide 790 million cubic metre (“mcm”) a year of gas, representing 5% of SSE’s forecasted annual requirements.

The amount of gas to be supplied translates to 800,00 therms/day to be valued under prevailing market prices of natural gas.

The said contract, including the one with Statoil, ensures SSE reduce its reliance on market purchases to support its contracts and generation requirements.

“Fuel supply contracts play a key part in helping us to meet our customers’ needs and contribute to the long-term stability of our energy portfolio,” Alistair Phillips-Davies, Generation & Supply Director of SSE, said in the statement.

“This transaction secures a long term supply of gas for the UK market from a creditworthy, reliable and local producer. It is exactly what is required for a stable and confident market which supports investment in new gas-fired generation.”

In February 2011, SSE paid US$324 million to Hess Limited in the acquisition of natural gas and infrastructure assets in the North Sea, which is said to produce 200 million therms for 2011 and expected to decline in production over the next ten years.

The President of Shell Energy Europe, speaking for the company, expressed they are “delighted” to provide a long-term solution for SSE.

“Shell’s broad energy supply portfolio and gas market expertise enable us to provide customers with real long-term solutions to their energy needs,’ he added.

The investors welcomed the news as shares in the London trading are up by 0.7% at 1,295 pence a share, at 11:00 GMT.

Company Spotlight

Scottish & Southern Energy distributes gas to 5.7 million dwellings and establishments through 75,000 gas mains in 50% stakes on both Scotland Gas Networks and Southern Gas Networks.

References
↑ Gas Supply Agreement with Statoil
↑ SSE, Shell Energy Europe ink 10-year gas pact
↑ Acquisition of North Sea Upstream Gas Assets
↑ SSE Business Network Operation

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