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Centrica has reached a £2 billion deal to buy gas from Norway over the next decade. This shows that the UK will continue to rely on imports of fossil fuels when it involves exploration in the North Sea.
The Energy Group purchases 500 million cubic meters of gas from Norway’s national horses from October to 2035 each year. This amounted to about 9% of UK gas demand last year, and is enough to supply 5 million homes.
Centrica’s Equinor transactions are roughly half of what they have purchased each year over the past three years, but are roughly the same as previous transactions in 2015.
The Minister wants to reduce the UK’s overall gas use to reduce emissions.
The agreement includes provisions that allow natural gas supplies to be exchanged for hydrogen from Equiner’s UK hydrogen production project.
Hydrogen is touted as a low carbon source for heating in UK homes, but the minister has instead focused on trying to install an electric heat pump in the home.
However, the hydrogen market has been slower than expected, the companies said Thursday.
Equinor CEO Anders Opedal said the transaction was “very important to energy security.” Chris O’Shea, CEO of Centrica, added:
As the North Sea Basin ages, the UK is increasingly dependent on gas imports, accelerated by British government plans to not issue new exploration licenses and develop wind and solar instead.
Last year, the UK imported about 10.4 billion pounds of gas, or more than two-thirds of its overall gas demand, with over 50% of its imports coming from Norway.
Centrica has been purchasing gas from Equinor since 2005. Three years ago – increased annual purchases to 10 bcm per year, a decrease of 1 bcm per year during a global scramble to ensure gas supply that leads to a surge in prices.
The 5 bcm supplied based on current transactions is piped from the gas field in Norwegian waters, but Equiners also produce gas on the British side of the North Sea.
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Centrica is seeking assistance from the UK government to renovate rough gas storage sites in the North Sea, which hopes to use it for long term use to store hydrogen instead of natural gas.
O’Shea complains that the site is losing money but needs to remain open to increase energy security. The UK is lacking in energy storage compared to its European peers, and at the beginning of the year Centrica issued a warning that its reserves had not been a week.
The UK acquires most of the gas on a “just-in-time” basis through pipelines to the North Sea, the EU and Norway, and is shipped from all over the world, including the US. This opens up to short-term price fluctuations.
