British energy company Centrica, the owner of British Gas, has inked a significant 10-year agreement valued at over £20 billion ($27.07 billion) with Norwegian energy firm Equinor to import natural gas starting in 2025, the companies announced Thursday. This deal will play a crucial role in Britain’s energy landscape as the country continues to rely heavily on gas for heating and electricity generation, despite its broader goals to reduce fossil fuel dependence.
Beginning October 1, Equinor will supply five billion cubic meters of gas annually through 2035, roughly meeting 10% of the UK’s total gas needs—enough to heat about five million homes, according to Centrica CEO Chris O’Shea. This new contract renews and replaces the previous decade-long arrangement between the two firms that spanned from 2015 to 2025.
O’Shea emphasized the importance of Norway as a dependable energy partner for the UK, highlighting the close ties that help ensure the country’s energy security. Last year, the UK imported nearly two-thirds of its gas, with half of those imports sourced from Norway. Norway has stepped up its gas deliveries to Europe following the reduction of Russian supplies triggered by the conflict in Ukraine and ensuing Western sanctions.
The invasion of Ukraine and resulting geopolitical tensions severely disrupted energy markets, causing a spike in prices that continues to impact British consumers. Meanwhile, the UK’s domestic North Sea gas production has sharply decreased since its peak in the late 1990s. The current Labour government has pledged to halt new oil and gas licenses as part of its climate commitments.
An innovative feature of the agreement is the built-in flexibility to potentially shift from natural gas to hydrogen supply in the future. Equinor CEO Anders Opedal noted that while the deal meets today’s energy demands, it also opens doors to collaborate on emerging clean energy solutions like hydrogen.
In a related development, Centrica’s CEO also revealed that the company is seeking governmental backing to maintain investment in its Rough gas storage facility, located off England’s east coast. Rough provides about half of the UK’s gas storage capacity but is currently operating at a loss estimated at £100 million this year. Without regulatory support, its continued operation is in jeopardy.
Responding to this, the UK’s Department for Energy Security and Net Zero (DESNZ) stated that the future of Rough is a commercial matter for Centrica but expressed willingness to consider proposals for gas storage that offer good value for taxpayers.