British Gas owner Centrica has signed a 10-yr deal worth more than £20 B ($27.07 B) with Norway's Equinor to secure gas supplies starting in 2025, both companies said on Thursday.

Britain aims to reduce its reliance on gas to help meet climate targets, but around 70% of its homes are still heated using the fossil fuel while gas-fired power plants account for around a quarter of the country's electricity supply.

The agreement, which begins on October 1, will see Equinor deliver 5 Bm3y of gas until 2035, representing about 10% of Britain's gas demand and enough to supply approximately 5 MM homes, Centrica CEO Chris O'Shea said.

The deal replaces a previous 10-yr supply contract between the companies running from 2015 to 2025.

"I think most people don't appreciate just how much we rely on our friends in Equinor, friends in Norway for energy security in the UK," he said in an interview.

Britain imported almost two-thirds of its gas demand last year, with half of the imports coming from Norway. Norway has increased its supplies to Europe since flows from Russia to Europe were curtailed after Russia's invasion of Ukraine in 2022.

The Ukraine conflict and subsequent Western sanctions on Russia rocked energy markets, driving up prices that continue to weigh on British consumers.

Britain’s North Sea fossil fuel production has declined sharply since its peak in the late 1990s and the Labour government has said it will not issue any new oil and gas licenses as part of its efforts to meet climate goals.

The contract includes an option to transition from natural gas to hydrogen in the future.

"This deal captures the kind of energy needed today, but at the same time... we can also together explore future energy (needs) like hydrogen," Equinor CEO Anders Opedal said.

Separately, O'Shea also said Centrica is seeking support from the UK government to enable it to invest in its Rough gas storage site, a depleted field off England's east coast, which accounts for about half of the country’s gas storage capacity.

He said Centrica will lose £100 MM operating the site this year and that without support, its future is uncertain.

"If we don't have a regulatory support framework for Rough, then I can't see it surviving too much longer," he said.

Britain's Department for Energy and Security and Net Zero (DESNZ) said the future of Rough is a commercial decision for Centrica.

"But we remain open to discussing proposals on gas storage sites, as long as it provides value for money for taxpayers," a DESNZ spokesperson said via email.

($1 = £0.7389)