Centrica, the parent company of British Gas, has signed a £20 billion agreement with Norway’s state-owned energy giant Equinor to supply nearly 10% of the UK’s gas needs annually until 2035 — a move aimed at bolstering energy security while supporting the country’s shift towards net zero.
Under the landmark deal, Centrica will purchase approximately 5 billion cubic metres of gas each year, beginning this winter, enough to power five million UK homes. The gas will be bought at market rates and delivered over the course of a decade.
Long-Term Gas Supply with a Green Future in Mind
This latest deal cements the UK’s long-standing energy relationship with Norway, which has supplied Britain with gas for over 50 years.
However, unlike past contracts, this agreement includes a green clause: the UK may swap future gas volumes for zero-carbon hydrogen produced by Equinor at its planned UK-based hydrogen facilities.
Equinor, in partnership with Centrica and SSE, is developing a number of low-carbon hydrogen projects in East Yorkshire, including a pioneering “pathfinder” hydrogen scheme at the Aldbrough gas storage site, which could be operational by 2029.
Chris O’Shea, Centrica’s chief executive, hailed the agreement as vital for the UK’s energy resilience and transition.
“This landmark agreement reinforces the vital role of gas in keeping Britain’s lights on today, while helping to create a robust hydrogen economy for tomorrow,” he said.
UK Gas Demand Expected to Decline as Net Zero Push Accelerates
Despite the significance of the deal, UK demand for gas is expected to fall sharply over the coming decades due to rising renewable energy generation and growing electricity imports from Europe.
According to the Climate Change Committee (CCC), gas currently accounts for around 40% of the UK’s primary energy demand — but this will need to drop to less than 15% by 2050 to meet legally binding climate targets.
Currently, around 70% of British homes rely on gas boilers for heating, and gas-fired power stations produce approximately a quarter of the country’s electricity.
Government policies aimed at decarbonisation include the rollout of 600,000 heat pumps annually and limiting gas plant usage to just 5% of electricity generation in the 2030s.
Smaller Than Previous Equinor Deal but Future-Focused
This new supply contract is slightly smaller than the previous 10-year deal between Centrica and Equinor, signed in 2015, which covered around 7.3 billion cubic metres per year.
A post-Ukraine invasion emergency agreement temporarily boosted supplies to over 10 billion cubic metres, amid Europe-wide efforts to replace Russian gas.
Today’s announcement underscores both the enduring importance of Norwegian gas to UK energy security and the growing emphasis on transitioning to low-carbon alternatives, such as hydrogen, over the next two decades.
