Centrica accelerated its push into oil and gas production yesterday as the owner of British Gas invested £1bn in the Norwegian North Sea.
The acquisition of stakes in eight oil and gas developments on the Norwegian continental shelf from Statoil will boost Centrica's production by a quarter and aid its quest to tap the vast profits on offer as wholesale prices soar.
The deal is part of a broader agreement between Centrica and Statoil, which will see the Norwegian giant supplying about £13bn worth of gas over the next 10 years, enough to power 3.5 million homes. The agreement – to supply a total of 50 billion cubic metres of gas over a decade starting in 2015 – will merely extend an existing agreement that began in 2005.
However, as competition for energy intensifies and security of supply becomes an increasingly political issue, the deal was was well received yesterday. The Prime Minister, David Cameron, "warmly welcomed" the agreement because it "will help to ensure the continued security and competitiveness of gas supplies to Britain".
Angelos Anastasiou, an analyst at Investec, said: "It is only an extension of an existing deal but it is big in terms of shoring up our supply. Just having access to Norwegian gas, which could have gone somewhere else, is a big thing for UK Plc."
Centrica is keen to step up the so-called upstream part of its business, which explores for and extracts oil and gas, as an exodus from nuclear power following the Fukushima disaster.
In the first half of the year, profits from Centrica's UK exploration and production business overtook the bottom-line contribution from its "downstream" operation, British Gas .