The agreement could mean a new pipeline being built between Norway and Britain.

Statoil will supply British Gas with five billion cubic metres of natural gas a year, which amounts to more than 10% of its current demand.

This is good news for our customers too, because it secures a long-term and stable supply of gas

Roy Gardner, chief executive Centrica

The deal is worth up to 50bn kroner (�4.4bn; $6.4bn) and will run for 10 years from October 2005 .

British Gas' parent company, Centrica, said it was its first long-term European gas supply contract.

Ground-breaking

The Norwegian company is already the UK's biggest gas importer, but this is its largest sale for 16 years.

Peter Mellbye, the head of Statoil's natural gas business, said: "Looking at sales and production in the UK market, we estimate that there will be a need for a new pipeline around 2006-2008".

Roy Gardner, Centrica's chief executive, said: "We are very pleased to have reached this ground-breaking agreement with Norway's leading producer and trader, with price linked to the UK gas market rather than to world oil prices.

"This is good news for our customers too, because it secures a long-term and stable supply of gas."

A year ago Statoil signed a contract with BP for the annual sale of 1.6 billion cubic metres of natural gas over 15 years.

The company said its goal was to boost annual sales to Britain to 10 billion cubic metres.