Centrica buys extra reserves

Sep 18 2007 by Iain Laing, The Journal

ENERGY giant Centrica has made a £242m acquisition as it built up more reserves to meet demand from British Gas customers.

The purchase of Newfield UK will give Centrica an 85% interest in the Grove gas field, which started production in the summer, as well as an 80% interest in another major gas development in the North Sea.

It is chief executive Sam Laidlaw’s first major deal at Centrica since he took the helm in July 2006, and comes as the company looks to build up its gas reserves to meet 35% of British Gas demand from about 20% currently.

The company is likely to spend about £2bn over the next three years on gas and power assets, alongside existing investments.

Current projects include the UK’s largest offshore wind farm. Lynn and Inner Dowsing are two adjacent wind farms acquired by Centrica in December 2003, which are being built 5km off the Lincolnshire coast, east of Skegness.

Centrica is also building the UK’s newest power station at Langage near Plymouth.

Mr Laidlaw said the Newfield acquisition added net reserves of up to 300 billion cubic feet of gas over the next three years, equivalent to more than a fifth of Centrica’s current UK gas reserves.

He added: “This important investment to acquire Newfield UK is in line with our strategy of increasing our level of gas reserves to supply our British Gas and European customers.”

Centrica pointed out that it will also benefit through gas being delivered into continental Europe, close to its main customer in Holland and Belgium.

Alongside the Grove field, the Seven Seas gas development project will begin production in 2010. It is estimated that additional capital expenditure of about £150m will be required to realise the full gas reserves potential.

Centrica has bought Newfield UK from Newfield International Holdings, a Houston-based oil and gas company.