2025-06-05T15:34:00Z

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The owner of British Gas, Centrica, has successfully negotiated a substantial £20 billion deal with Norway’s state energy company, Equinor. This pivotal agreement is set to provide the UK with a significant supply of natural gas, fulfilling nearly 10% of the country's energy needs for the next decade. Under the terms of the deal, Centrica will acquire approximately 5 billion cubic meters of gas annually from Equinor, which is enough to power around 5 million homes across the UK. This arrangement is set to commence this winter and will extend through to 2035, with gas supplied at prevailing market rates.

This deal represents the latest in a series of long-term partnerships forged between the UK and Norway, a country that has consistently been one of Britain’s primary sources of imported gas over the past 50 years. Notably, this agreement also aligns with the UK’s commitment to achieving net-zero carbon emissions. A significant clause included in the contract allows the UK to exchange some gas imports for emissions-free hydrogen generated from Equinor’s hydrogen production facility in the UK.

Equinor is currently collaborating with Centrica and energy company SSE on an array of low-carbon hydrogen projects located on the north bank of the Humber. One of the ambitious initiatives is to develop a pioneering hydrogen project at the existing Aldbrough gas storage facility in East Yorkshire, which SSE and Equinor aim to have operational by 2029. This project is a crucial step towards diversifying the UK's energy portfolio and moving towards cleaner energy solutions.

As of now, the UK relies heavily on Norwegian gas, importing nearly two-thirds of its total gas needs from the Scandinavian nation. However, it's noteworthy that the demand for gas in the UK reached record lows in the previous year due to a significant uptick in renewable energy production and enhanced electricity imports from Europe. With the UK government’s ambitious net-zero targets, gas demand is anticipated to decline sharply over the coming decade. These policies will further reduce reliance on gas-powered plants and encourage the adoption of electric alternatives in homes and businesses.

Chris O’Shea, Chief Executive Officer of Centrica, emphasized that this “landmark agreement” highlights the essential role of gas in ensuring the UK’s energy security as it transitions towards a low-carbon future. He expressed optimism that the deal will also stimulate a burgeoning hydrogen market, which is seen as vital for achieving the country's energy goals.

It’s important to note that this latest agreement is actually smaller than the previous decade-long contract established in 2015, when Centrica committed to purchasing about 7.3 billion cubic meters of gas per year from Equinor, which at that time also accounted for approximately 10% of the UK’s gas demand.

In light of recent geopolitical events, particularly Russia’s invasion of Ukraine, Centrica had to adapt its strategy. Following the disruption of Russian gas exports to Europe, Centrica agreed to a supplemental deal that increased their gas procurement from Equinor to over 10 billion cubic meters annually, representing about 12% of the UK's total gas demand.

The Climate Change Committee (CCC), which serves as the government’s official climate adviser, has projected a dramatic reduction in the UK’s gas demand in the years to come. Currently, gas constitutes 720 terawatt hours (TWh), or almost 40% of the UK’s primary energy requirement, according to the CCC’s carbon budgets. However, this figure must decline to 168 TWh, which is less than 15% of the primary energy demand by 2050, in order for the UK to remain within its carbon budget limits.

At present, around 70% of UK households rely on gas boilers for heating, while gas-fired power plants contribute roughly a quarter of the nation’s electricity supply. The government is actively pursuing ambitious goals, including the installation of up to 600,000 electric heat pumps in homes each year, alongside plans to limit the operation of gas plants to just 5% of the time in the 2030s. These strategic initiatives are integral to reducing the UK's dependence on fossil fuels and transitioning toward a more sustainable energy landscape.