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The owner of British Gas has placed a £1.5bn bet on the UK’s future reliance on fossil fuel imports after striking a deal to buy Europe’s biggest gas import terminal.
Centrica plans to partner with a US private equity firm to acquire the Isle of Grain terminal in Kent, which can import 15m tonnes of liquefied natural gas a year, even after Britain’s gas demand fell last year to its lowest level since the early 1990s.
The pair will buy the gas terminal from the FTSE 100 energy company National Grid, which in recent years has sold off its interests in Britain’s gas infrastructure in favour of investing in electricity grids.
Chris O’Shea, the chief executive of Centrica, said the “strategic asset” would continue to support the UK’s energy security “for many decades to come” during the transition to net zero.
The deal comes after Centrica’s £20bn deal with Norway’s state energy company earlier this summer to buy enough gas to meet nearly 10% of the UK’s needs for the next decade.
Under the agreement, Centrica will buy around 5bn cubic meters of gas from Equinor – enough to supply 5m UK homes – every year from this winter until 2035 at the prevailing market rate.
O’Shea has also called on the government to support a £2bn project to upgrade its Rough gas storage facility, the largest gas store in Britain, as a “very valuable insurance policy” for when the sun doesn’t shine and the wind doesn’t blow.
Britain’s gas imports tumbled by 47% last year to lows not recorded since before the pandemic, despite falling homegrown production of North Sea oil and gas, as the overall demand for gas slumped to its lowest level since 1992.
British households are expected to continue using gas for heating and cooking for decades as efforts to replace gas boilers with electric heat pumps have struggled to meet the government’s goal of installing 600,000 a year.
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But the electricity sector is expected to cut dramatically its reliance on gas power plants in the years ahead.
The UK has already reduced significantly its use of gas to generate electricity owing to a rise in electricity imports from Europe and lower energy demand overall. Wind power generated more electricity than gas in 2024, contributing 30% of the UK’s power needs against just over 26% from gas plants as low carbon generation hit a record high.
By the end of the decade, the government hopes gas plants will be used as a last resort option in the UK’s electricity market and generate just 5% of the UK’s power under its plans to create a virtually carbon-free power system.
Last month, Centrica struck a deal to take a 15% stake in the planned Sizewell C nuclear power plant on the Suffolk coast, which is expected to begin operating in the mid- to late 2030s.
