Centrica is in talks with four foreign governments to secure gas supplies to make up for diminishing output from its Morecambe Bay fields that provide Britain with up to 8 per cent of its gas requirements. The company, which trades as British Gas, is believed to be negotiating with Nigeria, Algeria, Trinidad and Malaysia in the hope of acquiring stakes of up to 50 per cent in new production projects. Analysts say that Centrica is ready to spend £1bn-plus over the next few years to clinch supply contracts as output from Morecambe Bay tails off – in 2005, production from the fields halved. The dash for gas comes as forecasters working for both Centrica and National Grid predict that the UK will look overseas for at least half its gas requirements by 2009. Supplies from the North Sea are running out faster than expected. But Centrica chief executive Sam Laidlaw is determined the company increases the amount of gas it controls by setting up joint ventures with countries in the Caribbean, Asia and the Middle East. Centrica reports its interim numbers this week when it could warn that gas bills will go up this winter as the cost of energy has risen steeply since January. The gas futures market indicates that the cost of gas per therm is up 21 per cent in seven months. Laidlaw is expected to face questions at the results presentation on Thursday about whether the board has held merger talks with Gazprom, the Russian energy giant. Last month, deputy chairman Alexander Medvedev said Gazprom was close to a deal that would increase its presence in Britain. There has been speculation for over a year that Gazprom could buy Centrica, although such a move would create a political storm as the Russian firm is closely linked to the Kremlin. Investment bankers say that Laidlaw has sounded out UK gas producer BG, which was part of Centrica before 1997, about a ‘defensive’ merger that would keep the Russians out. Some observers say that Gazprom may stop short of trying to acquire Centrica and buy a minority stake in return for a long-term supply contract. Earlier this year, in an exclusive interview with The Observer, Jake Ulrich, head of Centrica Energy, said that if Centrica owned more of its supplies it could better deal with price fluctuations. The need is urgent as last year British Gas lost one million customers after imposing huge price increases – a hike of 22 per cent in the spring and then 17 per cent in the autumn. Ulrich said: ‘Integration makes the business less volatile. We need to replenish reserves and get our own production up to 35 per cent of the gas needed to meet customers’ needs.’ Analysts agree. One said: ‘If Centrica owned more supplies, it would no longer be as vulnerable as it is today to rises in wholesale gas prices.’ Laidlaw has refused to rule out the option of a merger with another energy company. But valuations of oil and gas producers are high and may put groups such as BG out of Centrica’s reach.

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