Scottish & Southern Energy (SSE) is buying North Sea gas assets from New York-based Hess for $423m (£278m) in cash.
The acquisition will provide around 8 per cent of the company's daily requirement of 1300 million cubic feet (mcf) of gas, although the proportion is expected to decline over the coming decade, the company said yesterday.
The deal includes assets in the Everest/Lomond, Easington Catchment and Bacton regions of the North Sea, with total resources of 64 million barrels of oil equivalent (boe). SSE says further gas may yet be discovered in the areas.
Alongside the upstream assets, SSE is also buying a 17.7 per cent stake in the BP-operated Central Area Transmission System pipeline through which more than 10 per cent of the UK's gas is pumped 250 miles from the North Sea to a processing terminal in Teesside.
The Hess deal is SSE's first move into the ownership of gas fields. "This timely acquisition will enable SSE to enter the upstream gas sector in a measured way by buying proven and geographically diverse production assets," Ian Marchant, the chief executive, said. "These assets will provide a new source of primary fuel and a hedge for our gas generation and supply activities. The acquisition will also give us involvement throughout the gas chain."
SSE is not the only energy retailer to be expanding into upstream resources. Last year Centrica fought for months to take over Venture Production, in line with its strategy to build up its own supplies and insulate the group from increasingly volatile wholesale gas prices. The purchase boosted Centrica's reserves by 50 per cent, and the group also spent £3bn buying a 20 per cent stake in British Energy.