UK's Centrica to supply Brazil's Petrobras with LNG under new 15-year deal

The UK's Centrica said on Feb. 20 that it had signed a 15-year sale and purchase agreement to supply 800,000 mt/year of LNG to Brazil's Petrobras starting in 2027.

Under the new SPA, Centrica will source the LNG from its US LNG Sabine Pass and Delfin offtake agreements. The agreement comprises approximately 30% of Centrica's US portfolio.

Centrica said the agreement marked a "significant" step in expanding its global LNG business, diversifying the locations it can deliver LNG to and supporting energy security in Brazil with an "important" new long-term partner.

Centrica CEO Chris O'Shea said the agreement was part of its approach to building long-term partnerships while derisking its portfolio exposure in the medium term.

O'Shea said this would position the company "to continue growing our portfolio as new LNG supply comes into the market over the coming years."

Petrobras' Director of Energy Transition and Sustainability, Maurício Tolmasquim, said: "The agreement with Centrica is aligned with Petrobras' priorities to reduce its exposure to the spot market volatility."

He added that it would increase its competitiveness and be the "best option" for its customers.

Spot LNG prices globally remain high and volatile.

Platts, part of S&P Global Commodity Insights, assessed DES Brazil on Feb. 19 at $13.89/MMBtu. It hit a recent peak of $17.10/MMBtu on Feb. 10.

Brazil imported a total of 2.8 million mt of LNG in 2024, according to data from S&P Global Commodity Insights.

The US accounted for the bulk of the deliveries, with supplies of 2.3 million mt, or 82% of the total. Other suppliers included Trinidad and Tobago and Nigeria.

LNG optimization

Centrica said the Petrobras deal built on a previous gas supply agreement from October last year with US shale gas producer Coterra Energy.

The SPA with Coterra was for 100,000 MMBtu/d of gas, equivalent to around nine LNG cargoes.

Under the deal, Coterra will sell the volumes linked to European prices such as the Dutch TTF and the UK's NBP gas hubs for 10-year term, starting in 2028.

"We have further built optimization optionality through the signing of the Coterra SPA," Centrica said Feb. 20.

"This deal, alongside the Petrobras deal announced today, demonstrates our approach in building valued partnerships through physical gas transactions which generate a margin in their own right," it said.

It also allows the company to de-risk its LNG portfolio and retain physical optionality around cargoes, it said.

Centrica also announced its 2024 results on Feb. 20, saying the company had stepped up the hedging profile of its Sabine Pass LNG offtake.

This, it said, was designed to protect against future declines in gas prices and "create a base margin around which we can optimize."

"This includes new long-term natural gas deals, such as our agreement with Coterra, which is linked to European gas prices such as TTF and NBP and commences in 2028, and Petrobras," it said.

"As a result, we are now almost 100% hedged until the end of 2026, with over 50% through to the end of the decade."

Supply agreements

Centrica added that its LNG portfolio was forecast to remain "profitable" when taking into account future hedges and cargoes.

Centrica has a 20-year agreement with Cheniere to purchase 89 Bcf/year of LNG volumes for export from Sabine Pass.

It commits Centrica to capacity payments of GBP3.2 billion between 2024 and 2039, but allows the company to make up to GBP4.6 billion of commodity purchases based on market gas prices.

Last year, Centrica also signed a three-year agreement to purchase LNG volumes from Spain's Repsol for 2025-2027.

Under the agreement, Centrica is committed to making purchases amounting to GBP556 million based on market gas prices and foreign exchange rates.

Agreements for supply from two other projects are yet to take effect -- Mozambqiue LNG and Delfin LNG.