London/Moscow, 20 September (Argus) — The UK's Centrica has agreed to buy 2.4bn m³/yr of gas from Russia's state-controlled Gazprom at a price 100pc linked to gas markets rather than the oil price.

No financial details were provided for the three-year deal — which starts in 2014 — although Gazprom confirms that pricing will be based on the NBP spot market. The deal is Gazprom's first medium-term contract with a 100pc gas indexation.

Centrica said the gas would be delivered at the NBP but does not say how it would get there. Gazprom is already a shareholder in the Interconnector pipeline between the UK and Belgium, holding 6bn m³/yr of reverse flow capacity from the continent to the UK as well as 2bn m³/yr of forward flow capacity.

But Gazprom also holds almost half of the capacity at the 4.1bn m³ Bergermeer gas storage facility in the Netherlands, which is located just 20km from the BBL pipeline to the UK, on which the Russian firm is a shipper. With the Nord Stream pipeline now fully operational, the BBL would be the most direct route for Russian gas to reach the UK. If the BBL pipeline were to be used for the 6.6mn m³/d Centrica contract, it could dramatically increase the pipeline's daily flow rate — which in the year to the start of this month averaged just 19.6mn m³/d.

Centrica has signed a number of gas supply deals in recent years, including a 50bn m³ 10-year NBP-indexed deal with Norway's state-controlled Statoil last November and a three-year deal in February last year with state-owned Qatargas for the delivery of 9.9bn m³ of LNG to the Isle of Grain regasification plant.

It was unclear today whether the Gazprom deal will be seasonally weighted in the same way as Centrica's deal with Statoil or the firm's 8bn m³/yr supply deal with Dutch gas wholesaler Gasterra. The Dutch company delivers gas through the BBL at a rate of 5bn m³/yr in winter and 3bn m³/yr in summer.

Gazprom has said in the past that as Europe's most liquid market, the UK was the most likely place for 100pc gas indexation to be introduced. But the Russian firm is reluctant to do the same with its other European buyers on the grounds that continental markets are not liquid enough. The company is in dispute with the European Commission, which insists wholesale gas prices should be linked to demand rather than oil indexes.

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