E.ON, RasGas sign flexible 2 bcm LNG supply deal into UK

(Refiles to correct day to Wednesday in first paragraph)

* LNG to go from Qatar to UK's Isle of Grain

* Flexible deal allows Qatar to fully divert supply

* Qatar eyeing European terminals as fallback option if Asian demand sours

* RasGas says Britain an important market

By Vera Eckert and Oleg Vukmanovic

FRANKFURT/MILAN, May 28 (Reuters) - Britain may receive more liquefied natural gas (LNG) from the world's biggest producer Qatar under a deal signed by utility E.ON on Wednesday, underscoring growing dependence on the Gulf State as indigenous North Sea reserves run dry.

Eon (Taiwan OTC: 3411.TWO - news) 's energy trading arm struck a deal to send up to 2 billion cubic metres of gas over three years from Qatari producer RasGas to Britain's Isle of Grain import terminal, where Eon has import rights.

The deal is flexible, according to a joint company statement, meaning that Qatar is not obliged to ship any LNG to the UK and can divert cargoes at will to more attractive Asian destinations.

Britain depends increasingly on Qatar to make up for falling domestic resources but has so far failed to receive a supply guarantee from the Gulf producer, allowing Qatar to divert cargoes away from Britain to the highest-priced market.

LNG, gas condensed to liquid form, is transported over long-distances by ocean-going tankers before being regasified at coastal terminals and fed into domestic gas grids.

Last year Petronas Energy struck a flexible deal to import LNG from Qatargas, a sister company to RasGas, into Britain's Dragon terminal in Wales. That supply is also fully divertible, a Qatargas spokesman said at the time.

Eon also signed a fully-divertible deal with Qatargas last year to import up to 10 Bcm into the Gate terminal in the Netherlands.

FALLBACK OPTIONS

Qatar has pursued flexible deals with European importers as a fallback option in case demand in its main markets in Asia declines, according to industry sources.

An expected surge in new LNG supply from projects in Australia, east Africa, Russia and North America over the next few years may fully meet needs in Asia and South America.

As well as this latest deal for UK imports, EON has a similar flexible deal with Qatargas to potentially import cargoes into the Gate terminal in the Netherlands.

"The contract is a significant step in the development of our global growth strategy and is another big step in the development of our long-term partnership with the state of Qatar," Christopher Delbrueck, chief executive of E.ON trading subsidiary E.ON Global Commodities (EGC), said.

British utility Centrica (LSE: CNA.L - news) last year extended a firmer deal to import Qatari LNG into Isle of Grain until the end of 2018.

Qatar also built an LNG import terminal at South Hook, Wales, into which it delivers regular cargoes.

Many LNG import terminals across Europe are lying idle as traders and producers divert volumes to higher-paying eastern markets. (Reporting by Vera Eckert, editing by Arno Schuetze and Susan Thomas)