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Business News

Centrica signs £13bn Norway supply deal


British Gas owner Centrica signed a supply deal today that will secure sufficient gas to meet around 5% of the UK's annual demand.

The 10-year, £13 billion agreement with Norway's Statoil involves the supply of 50 billion cubic metres of gas to the UK from 2015.

Centrica said the deal highlighted the importance of the UK's relationship with Norway for the country's energy security.

The move takes the value of future gas supplies secured by Centrica for the UK to more than £50 billion.

Centrica is also spending £965 million on buying oil and gas assets from Statoil in the Norwegian sector of the North Sea.

The deal will lift Centrica's production by around 25% and means it will have operating facilities in Norway for the first time.

Prime Minister David Cameron said the announcement underlined the strength and depth of the ties between the UK and Norway.

He said: "Gas plays a central role in powering our economy, and will continue to do so for decades to come.

"Today's agreement will help to ensure the continued security and competitiveness of gas supplies to Britain, from a trusted and reliable neighbour."

The Statoil supply deal, which is valued at £13 billion based on today's prices, replaces a previous 10-year deal that was signed in June 2002 and started in 2005. The new agreement is enough for 3.5 million UK households.

Centrica's shares have struggled this year amid fears that the group will struggle to recoup higher wholesale costs.

It said last week that recent warmer weather and higher retail prices had impacted on demand, causing full-year earnings to miss hopes.

Angelos Anastasiou, an analyst at Investec Securities, said the two deals with Statoil should underpin Centrica's upstream and downstream operations.

He added: "Confidence still needs to be regained in the UK supply market for full confidence in the shares to be achieved. However, we believe that the share price is now factoring in unreasonably pessimistic scenarios on the supply side."