Centrica, the parent company of British Gas, has signed a strategic agreement with Statoil ASA for the supply of 50 billion cubic metres (bcm) of gas to the UK.

The 10 year, NBP-linked gas supply contract begins in 2015 and secures sufficient gas to meet around five per cent of total UK annual demand, enough for 3.5 million homes. With Britain currently importing around 50 per cent of its gas requirements, the announcement underlines the strategic importance of the Norwegian relationship to UK energy security.

In a separate transaction, Centrica also announced it has reached agreement with Statoil Petroleum AS to acquire a focused package of producing and development oil and gas assets in the Norwegian sector of the North Sea, for a cash consideration of US$1,525 million (£965 million). An additional payment of up to US$100 million (£63 million) is contingent on future production performance of the Kvitebjørn asset. The value of the gross assets will be determined by the final value of the consideration including the closing adjustment. The deal will add 117 million barrels of oil equivalent (mmboe) of 2P reserves, an increase of 29 per cent1, as well as attractive development potential. It is subject to customary closing conditions.

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The transaction increases Centrica's production by 34,000 boe per day (12 mmboe per annum), an increase of around 25 per cent, strengthening the Company's energy hedge and extending its production profile. It will build on Centrica's growing position in Norway, delivering value, substantially increasing scale and improving the sustainability of its upstream business. Centrica also becomes an operator of producing assets in Norway for the first time.

In addition, Centrica and Statoil ASA signed a Memorandum of Understanding (MOU) to consider partnering on gas-focused exploration opportunities in Norway and the UK.

Commenting on the deal, Sam Laidlaw, CEO Centrica, said: "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. Following the signing of this 10 year deal, the total value of future gas supplies secured by Centrica for the UK now stands at more than £50 billion."

He continued: "As well as being the second largest gas producer in the UK, we also have one of the fastest growing exploration and production businesses on the Norwegian continental shelf. This transaction is an important further step in building the business and deploys capital to deliver value. Much of the gas acquired through this transaction will also come to the UK market, providing further energy security for British Gas customers long into the future."

Prime Minister David Cameron said: "I warmly welcome this announcement, which underlines the strength and depth of the partnership that the UK & Norway enjoy. 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".

(CD)