Saffron Energy's Italian natural gas contract with Shell is extended

Natural gas developer Saffron Energy’s off-take contract with Royal Dutch Shell has been extended to 1 October 2018 with a deal for a further one-year extension.

As part of the agreement, Saffron's subsidiary Northsun Italia provides off take gas for all Shell Energy Italia’s gas fields in Italy.

Gas produced from Northsun’s fields is transported directly into the Italian national grid, which is owned and operated by SNAM Rete Gas.

Northsun has been supplying Shell Energy Italia with natural gas for four years, with a contractual formula that allows it to mitigate the market risks, while the Italian market is considered a premium pricing market compared with other international markets, with the spot price now trading at around 19.44 cents per cubic metre.

Saffron chief executive Michael Masterman said that the Italian gas market is robust and attractive due to the high-quality gas produced, an accessible low-cost transportation network, paired together with a pricing environment that has been stable and higher than other European countries.

Spot gas prices have risen significantly over the last 12 months from €14 cent per cubic metre to around €20 cent per cubic metre.

Masterman added that the contract signed with Shell Energy Italia is a key element for the company, as it has a buyer in line for the gas produced from future assets, which is a benefit for its cash flow.

Shares in Saffron Energy were up 3.37% to 8.53p at 0931 GMT.