British Gas owner signs deal with Norway firm for extra UK supplies

  • 6/16/2022
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The British Gas owner, Centrica, has signed a major supply deal with the Norwegian state oil company, Equinor, as ministers scramble to secure domestic energy supplies. Equinor has agreed to deliver an additional 1bn cubic metres of gas supplies to the company for each of the next three years – enough to heat an additional 4.5m UK homes. The new deal takes Centrica’s total supply deal with Equinor to more than 10bn cubic metres a year, about 12% of Britain’s total gas demand. Energy suppliers are racing to shore up supplies of gas for this winter after Russia’s invasion of Ukraine squeezed the market. Although Britain took just 4% of its gas directly from Russia before the war, the EU sourced 40% of its gas needs from there, leaving intense competition to replace those supplies from elsewhere. Wholesale gas prices have rocketed this week with an extended outage at the Freeport liquefied natural gas plant after a fire at the US facility, and the curtailment of supplies via the Russian Nord Stream 1 pipeline. The business and energy secretary, Kwasi Kwarteng, said: “With Russia’s criminal invasion of Ukraine, it is more important than ever that we source more of the gas we need domestically, but also from safe and reliable import partners while we transition. “This major supply deal agreed today will help underpin British energy security over the next few years, and also reinforce our partnership with Norway as a key international energy ally.” Kwarteng stressed that the government was not turning its back on renewable energy and homegrown nuclear projects but said “we will still need natural gas for many decades to come”. Kwarteng has embarked on a drive to secure energy supplies ahead of a tricky winter which will see energy firms competing for supplies and consumers experiencing a spike in household bills. Earlier this week, the government reached an agreement with France’s EDF to keep the West Burton A coal plant in Nottinghamshire open through the winter beyond its planned September closure date. However, ministers faced criticism for being too slow to ask EDF to keep Hinkley Point B nuclear power plant in Somerset open. It is due to close next month. Chris O’Shea, Centrica’s chief executive, said: “At a time when energy security is paramount, I’m pleased that we are able to do our bit to ease the pressure and provide some more certainty ahead of what may be a difficult winter. “This important agreement with Equinor underpins vital domestic supplies and strengthens the strategic relationship between the UK and Norway.” Centrica is also in negotiations to reopen Britain’s biggest gas storage site – Rough, off the east coast of England – which was shut in 2017. AB Bernstein analyst Deepa Venkateswaran was sceptical over whether the Equinor deal would make a significant difference to Kwarteng’s domestic energy drive. She said: “This is not a huge amount of gas. From a UK security of supply perspective the reopening of Rough would be far more significant.” Centrica has seen its profits surge during the energy crisis and its stock has risen 46% this year. O’Shea has argued that Rishi Sunak’s windfall tax on the industry could damage investment.

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