Centrica plc, the parent company of British Gas, has acquired a controlling interest in a project to convert the Baird gas field in the southern North Sea into the UK's second largest gas storage facility.

Centrica has acquired from Perenco a 70 per cent interest in a project to convert the largely depleted Baird gas field for an initial payment of £25 million. Perenco will retain the remaining 30 per cent stake in the project.

Centrica will manage the design and project development incurring further costs of around £12m before a final investment decision is made. To take the project to completion Centrica's total potential investment in the project would be approximately £1.2 billion1. It is anticipated that the project will commence commercial operations in 2013.

The proposed Baird storage facility would have capacity of approximately 60 billion cubic feet (bcf), just over half the 118 bcf capacity of Rough, the UK's largest gas storage facility. It will be a faster and more flexible asset than Rough with the capability to capture more value from market volatility. Pre-development studies on the project will run until Q3 2010, before a final investment decision is made. If a decision is made to progress, Centrica would lead the development of the project, and on completion, operate the facility.

Baird is Centrica's third gas storage project announcement over the last 12 months, and is another step towards achieving Centrica's aim of implementing a multi-asset, multi-product gas storage model. It follows the announcement by Centrica and its partners in March 2008 of a project to convert the Bains gas field and the acquisition of the Caythorpe gas field in September 2008. These two projects combined are expected to add around 25bcf of storage capacity over the next 4 years.

Sam Laidlaw, Centrica chief executive, said: "The UK is in need of more gas storage to ensure supplies for customers in the future. The impact on gas supplies across Europe following the Russian dispute with Ukraine, coupled with one of the coldest winters for many years highlights the importance of new storage to the UK. This major project, coupled with Bains and Caythorpe, underlines Centrica's determination to invest in substantial new capacity.

"We are pleased to form this new partnership with Perenco. The Baird field will neatly complement Rough given its faster gas injection and withdrawal capability, enabling us to offer storage customers significant flexibility."

Tags: Centrica plc