Centrica plc, the parent company of British Gas, today announced it has reached agreement with Hess Limited to acquire a 67 per cent interest in the undeveloped York gas fields in the Southern North Sea for £22 million in cash.

The acquisition adds to the 23 per cent of the development acquired as part of the Rough gas storage acquisition in 2003, and takes Centrica's interest in the fields to 90 per cent.

The York gas development represents the largest known undeveloped gas reserve in the southern sector of the North Sea. After further capital investment of around £220 million Centrica expects to recognise 107 billion cubic feet (bcf) of reserves from its enlarged stake in the field, of which 79 bcf are directly attributable to this acquisition.

Once developed, unit costs of production on these fields are expected to be lower than the average across Centrica's other joint venture fields due to its proximity to Rough. The profits from production will be subject to the normal UK tax rate for gas production, currently 50%

Sam Laidlaw, Chief Executive of Centrica, said: "This investment is in line with our strategic priority to reduce the Group's exposure to movements in gas prices through securing additional upstream assets. It also increases the level of gas reserves to supply our British Gas customers and builds on our existing portfolio of producing and exploration prospects."

"This deal underlines our commitment to invest in new energy supplies from the North Sea at a time when existing North Sea production is in decline"

The York fields, situated adjacent to the Rough gas storage reservoir, comprise the main South reservoir and a separate East reservoir, both capable of development. The first gas flows are expected as early as 2011, and Centrica plans to export production via its Easington terminal.

The transaction builds on Centrica's position within the UK and Norwegian sectors of the North Sea. Centrica holds interests in over thirty producing or development stage assets in the North Sea, and also has interests in twelve exploration licences in the Norwegian sector.