Gas imports (long-term contracts): At-a-glance summary
The annual import volume covered by long-term contracts is currently just under 50bcm. This equates to roughly half of total GB demand. This does not mean all gas will arrive at GB. Delivery is often dependent on the situation elsewhere in the global gas market.
Relevance and further information
A long-term contract is when a seller and a buyer agree to exchange an amount of gas for a number of years in the future. They are distinct from spot or forward contracts which are agreed through trading on an exchange or bilateral trading platform.
Shippers will typically buy gas through a mix of long-term contracts and shorter-term forward and spot trading. Long-term contracts give greater certainty to buyers and sellers that they will have secure supplies for future years.
Generally in GB, contracts are linked to the GB gas market price, whereas in Europe they have historically been linked to the oil price.
The amount of gas contracted for in long-term contracts gives some certainty about current and future security of supply.
The chart shows how some long-term import contracts are firm and some are interruptible.
A firm contract generally means that those supplying the gas must supply the firm volume, and those buying the gas must take that volume.
Interruptible contracts contain various clauses that mean the contracted volumes may not have to be supplied. For example, all Liquefied Natural Gas (LNG) contracts in GB are currently interruptible, with delivery usually dependent on the global LNG market. If increased security of supply risks in GB caused our prices to rise relative to the global market, then these contracts indicate that LNG deliveries to GB should increase.