Centrica signs £14bn of deals with Statoil

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 also see the Norwegian giant supplying about £13bn worth of gas over 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 – extends a deal 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."

Mr Anastasiou added: "But for me the exciting part of the announcement is the deal in the Norwegian continental shelf. It's at a good price and it adds to its production."

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, rising global demand for energy and uncertainty in the Middle East have sent wholesale prices soaring. 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 .

Centrica's new interest in the Norwegian shelf facilities will add 34,000 barrels of oil equivalent a day, or 12 million barrels a year, to the group's annual production.

Centrica ceded the bulk of its upstream assets to BG Group when the two entities were created from the demerger of British Gas Plc in 1997. However, it did retain the Morecambe Bay gas fields, the largest in the UK.

Centrica's acquisition of FTSE 250-listed Venture Production in August 2009 signalled a growing interest in exploration and production and a few months later the group set up its Centrica Energy Upstream division.

Centrica Energy Upstream is now the second biggest gas producer in the UK North Sea and also has operations in the Netherlands, Norway and Trinidad, which employ a total of 900 people. Centrica is expected to sign further deals in the exploration and production sector.