SCOTTISH Gas-owner Centrica has slashed the valuation of its North Sea-focused oil and gas business by a further £640 million as it dampened hopes there is lots to go for in the West of Shetland area.

The impairment charge recorded by Centrica reflects the impact of the fall in oil and gas prices last year that was triggered by the coronavirus crisis.

The company indicated this has raised big questions about the commercial viability of finds made West of Shetland, which generated excitement in the industry.

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Centrica said the write downs included £135m in respect of its Greater Warwick Area assets, West of Shetland “reflecting significant uncertainty over field development”.

The cut in the valuation of the oil and gas operation was a big factor in Centrica suffering another year of hefty losses amid efforts by chief executive Chris O’Shea to revamp the group.

Centrica has been trying to sell its Spirit Energy oil and gas business since 2019, after deciding to focus on the supply of gas and electricity and related services to consumers and businesses.

However, Centrica revealed that British Gas lost 164,000 energy customers last year, two per cent of the initial total. The losses included an undisclosed number of Scottish Gas customers.

Centrica said the pandemic impact wiped around £250m off earnings in total as demand for energy fell and customers’ bad debts increased by around £80m.

Cost-cutting measures only partially offset the impact.

Mr O’Shea said turnaround efforts “won’t be easy”, with more than 3,000 jobs gone by the end of 2020 under a cost-cutting plan that will see 5,000 roles axed.

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The group said the $3.6bn (£2.6bn) sale of the Direct Energy business in the US in January had strengthened its balance sheet and allowed an increased focus on core UK and Ireland activities.

While the process to sell the group’s 69% stake in Spirit was paused amid the uncertainty created by the pandemic, Centrica said it still intended to offload the business.

Spirit invested heavily in West of Shetland after buying stakes in acreage containing finds made by Hurricane Energy. The acreage includes the Greater Warwick Area.

Centrica lost £577m from continuing operations before tax last year, compared with £1bn in 2019.

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The group cut the valuation of its oil and gas business by £476m in 2019.

Hurricane Energy enjoyed drilling success in a little-explored geological layer of rock West of Shetland. It has faced big challenges in recent months after suffering setbacks on the key Lancaster field.