Gas supply agreement with Shell

17 Feb 2012

SSE and Shell Energy Europe (“Shell”) have agreed a 10-year gas supply agreement of 790mcm (292 Mth) per annum, commencing in 2015. This represents approximately 5% of SSE’s forecast typical annual gas requirements. The gas will be supplied as a firm delivery of 800,000 th/day, at a price linked to prevailing prices in the natural gas market.

The structure of the agreement fits well with the gas purchasing profile SSE needs to support its business contracts and generation requirements, and will therefore reduce its reliance on market purchases.

The agreement with Shell follows SSE’s 10-year agreement with Statoil in June 2011 and the acquisition from Hess Limited of North Sea natural gas assets in February 2011.

Alistair Phillips-Davies, Generation and Supply Director of SSE said:

“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. SSE has a good relationship with Shell and this long term agreement offers an excellent opportunity to cover a portion of SSE future gas needs with an attractive pricing structure and minimal risk.

“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.”

Slavko Preocanin, President of Shell Energy Europe said; “We are delighted to have created this 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.”