Advance deal struck for Dutch firm to buy gas from proposed Islandmagee sub-sea store
LONDON-listed energy company InfraStrata has struck a deal with Vitol for the Dutch firm to buy future product from its proposed gas storage facility in Islandmagee.
InfraStrata is proposing to create seven underground caverns below Larne Lough to store 500 million cubic metres of natural gas.
In a statement to the stock market it said its subsidiary Islandmagee Energy Limited has signed a binding term sheet with Vitol to enter into a gas storage agreement for long-term storage capacity offtake.
An offtake agreement is a deal between a producer and buyer to purchase or sell portions of the future production, and is normally negotiated prior to the construction of the facility to secure a market for its future output.
Vitol's primary business is energy trading, and it trades more than 7.4 million barrels of crude oil and products a day. It is privately owned with 40 offices, the largest being in Bahrain, Geneva, Houston, London, Rotterdam and Singapore.
Under the terms of the contract, Vitol will enter into a 12-year gas storage agreement with Islandmagee Energy Limited to utilise the capacity of all seven gas storage caverns proposed at the facility.
Construction of the caverns is planned to commence later this year, subject to funding, and first gas is then expected to be injected in the fourth quarter of 2022, with full commercial operations planned to commence in storage year 2023-24.
InfraStrata - which in January raised £1.5 million via a share placing in order to fund land acquisitions and other matters relating to Islandmagee - believes the proposed 500 million cubic metres natural gas cavern storage facility will provide a quarter of the UK's natural gas storage.
Its chief executive John Wood said: “We're extremely happy to welcome Vitol on board as the exclusive offtake partner for our Islandmagee gas storage project.
“We have spent considerable time working with Vitol to ensure the agreement reached has a positive outcome for both parties. Whilst subject to final contract, this is the first commercial gas storage deal that has been entered into in the UK for several years, clearly demonstrating the market demand for this type of storage facility. We look forward to working in conjunction with Vitol for many years to come.”
Michael Curran, head of gas trading at Vitol, added: “This store will provide reliable, flexible and long-term solutions to our regional and global client base. Gas is an essential complement to wind and solar and, as the energy mix evolves, we anticipate its role will grow. We are very pleased in this first step of our relationship with InfraStrata and will look to partner with them on suitable projects in future.”