Centrica plc and Qatar Petroleum International (QPI) have agreed to acquire jointly a package of producing conventional natural gas and crude oil assets and associated infrastructure located in the Western Canadian Sedimentary Basin from Suncor Energy for £650 million, cash.

The assets are located principally in South and Central Alberta where they overlap with existing Centrica assets, providing the opportunity for cost savings in production and development, and in North East British Columbia. The package also includes over 1 million acres of undeveloped land and there is significant potential for reserves and production upside through the use of horizontal drilling and multi-stage fracturing.

The acquisition is the first investment under the Memorandum of Understanding (MoU) signed between the two parties in December 2011. The assets will be held in a newly established partnership between Centrica (60% share) and QPI (40% share), which will be operated by Centrica. The assets include proven and probable (2P) reserves estimated by the partners at 978 billion cubic feet equivalent (90% natural gas), with estimated 2013 production of approximately 250 million cubic feet equivalent per day (mmcfe/d), equal to 15 million barrels of oil equivalent per annum.

Sam Laidlaw, Chief Executive of Centrica, said: “I am delighted to achieve our first investment with QPI under the MoU, and the establishment of a new partnership in North America. The acquisition provides attractive returns in a region we know well, and significantly increases the size and quality of our portfolio. It also presents exciting development opportunities, with the potential to improve returns further. Today’s announcement marks another step in delivering the strategy we announced in February and strengthens the relationship between Centrica and QPI. We look forward to working together to further expand the scale and scope of our joint North American operations.”