Centrica buys Norwegian production assets

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Date: Wednesday 09 Jul 2008

LONDON (ShareCast) - British Gas owner Centrica has expanded its production capabilities in Norway as part of its strategy to secure additional upstream assets.

The company is paying $375m (£190m) in cash to Marathon Oil for a package of non-operated gas and oil assets in Norway. The package includes the company’s first gas production in the Norwegian sector.

Centrica said the acquired assets will require additional investment of around £125m to fully exploit the total reserves potential of 165bn cubic feet equivalent (bcfe) over the next four year.

At the beginning of 2008 the effective recognisable reserves were 100 bcfe, with gas representing about 70 bcfe of that total. This total has since reduced as a result of production activity this year.

Gas currently being produced from the fields is contracted at prices directly linked to the UK market until 2011, after which Centrica will be free to deliver the gas to the UK or continental Europe.

“This investment is in line with our strategy to reduce the group's exposure to movements in gas prices through securing additional upstream assets,” said Sam Laidlaw, chief executive of Centrica. “It also increases the level of gas reserves to supply our British Gas customers and gives us our first producing interests in Norway, building on our existing exploration position,” Laidlaw added.

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