Centrica in £13bn tie up with Statoil

Centrica, the company which owns British Gas, has signed a deal with the Norwegian company Statoil to buy £13bn worth of gas over ten years.

The deal, which will run from 2015 will provide the UK with 50bn cubic metres of gas or the equivalent of 5% of total UK demand.

In a separate transaction, Centrica has also announced it is to buy some of Statoil's assets in the Norwegian sector of the North sea for £965m, with a further £63m to be paid on the future performance of the assets.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

The transaction will increase Centrica's production to 34,000 barrels of oil per day, a boost of around 25%.

The third element of today's announcement is that Centrica and Statoil have signed a memorandum of understanding to consider partnering on gas-focused exploration opportunities in both Norway and the UK.

In response to the deal the Prime Minister David Cameron said "Today's agreement will help to ensure the continued security and competitiveness of gas supplies to Britain, from a trusted and reliable neighbour".

Sam Laidlaw, the chief executive of Centrica added:

"Centrica is at the forefront of helping to deliver UK energy security and our strategic relationship with Statoil links us to one of the world's largest gas exporters and a natural partner to the UK."

Today's deal follows a similar (if smaller) agreement which began in 2005 under which Statoil delivers 5bn cubic metres of gas to the UK. That transaction underpinned the construction of the Langeled pipeline, which now provides up to 20 per cent of the UK's gas requirements.

BS