Centrica Announces Landmark £20Billion Gas Partnership

In a decisive move to bolster the United Kingdom's energy resilience, British Gas owner Centrica plc (LON: CNA) today announced a colossal, £20 billion strategic partnership with Norwegian energy titan Equinor ASA (EQNR.OL).

The agreement, set to channel a steady five billion cubic metres of gas annually to the UK through to 2035, marks a significant step in securing long-term energy supplies amidst a volatile global landscape and increasing calls for robust national energy strategies.

The deal lands as Centrica, currently trading at 161.40 GBp with a market capitalisation of approximately £7.94 billion, navigates a complex energy market. The share price has been holding up well this year, as gains of 17.64% represent a significant outperformance on the broader FTSE 100 (+6.4%) over the same period.

This long-term commitment with Equinor, a cornerstone of Norway's energy exports, is poised not only to enhance the UK's energy security but also to lay foundational work for a future hydrogen economy.

Chris O’Shea, Chief Executive of Centrica, emphasized the immediate impact on national preparedness. “Over the last few years, we’ve seen first-hand how important energy security is,” O’Shea stated. “Today’s deal not only ensures the UK’s energy security has improved but also paves the way for a burgeoning hydrogen market.” He further stressed that Centrica is actively collaborating with the Government to expand gas storage capabilities, a critical component of national energy defence.

This proactive stance from Centrica aligns with urgent calls from industry leaders. Rain Newton-Smith, chief executive of the Confederation of British Industry (CBI), is slated to address the pressing need for a “serious plan” from the Government to mitigate soaring energy tariffs and invest in energy security, as businesses grapple with crippling power bills alongside tax and wage pressures. The new Centrica-Equinor pact directly addresses the supply-side of this equation, particularly pertinent as around half of all UK gas was imported from Norway last year, a figure that saw a notable increase following the Russian invasion of Ukraine and the subsequent recalibration of European energy flows.

O’Shea framed the Equinor agreement as a “landmark” that “underscores the vital role that natural gas plays as a transition fuel as we navigate towards a low carbon energy future.” For Centrica shareholders, the CEO highlighted the strategic intent: “The deal represents a significant investment in the UK’s future, showing that Centrica will make bold investments that drive forward the energy transition while delivering value for our shareholders.”

A forward-looking component embedded within the contract is the provision for natural gas sales to be incrementally replaced with hydrogen. This strategic foresight positions both companies at the vanguard of the nascent hydrogen market, a critical pathway for decarbonising heavy industry and transport. “This landmark agreement… paves the way for a burgeoning hydrogen market,” O'Shea reiterated, signalling Centrica's commitment to future-proofing its energy portfolio.

Equinor, a long-standing energy partner to the UK, echoed the sentiment of enduring collaboration. Anders Opedal, Equinor’s President and Chief Executive, remarked, “For nearly 50 years, we have supported the UK’s energy security with reliable gas supplies. In addition, we have advanced offshore wind and pioneered decarbonisation solutions.” Opedal added, “We are pleased to strengthen the energy partnership further through a new gas sales agreement with our longstanding customer and partner Centrica.”

As the UK continues to navigate the complexities of the global energy transition, balancing immediate security needs with long-term decarbonisation goals, partnerships like the Centrica-Equinor deal will be pivotal. This £20 billion commitment not only secures a significant tranche of the nation's gas requirements for over a decade but also strategically invests in the promise of hydrogen, signalling a pragmatic and forward-thinking approach to a resilient energy future.