Supplying a gas-hungry Europe

Norway is fortunate to have her main gas markets so close by in Continental Europe and in the United Kingdom. This advantageous position is used to the full to expand exports of natural gas and to retain market share. On current estimates, principally based on development of new gas fields on the Norwegian Continental Shelf (NCS) and the construction of new gas pipelines, primarily to the UK, gas exports could reach 120 billion Sm3 (standard cubic metres) in 10 years time, against 71 billion in 2003. All gas export is made on long-term contracts, often concluded before gas fields are ready developed.

At present Norway has around 17.0 per cent of the European market, but will face increasing competition from Russia, with her extensive pipeline network from huge gas fields. However, Norway has new fields under development, like Snøhvit, Ormen Lange and Kristin.

Norway pipes gas to the United Kingdom and through terminals at Emden, Zeebrugge and Dornum to Germany, the Netherlands, Belgium, France, Italy, Spain, Austria, Czechia and Poland. According to Rune Bjørnson, executive vice president for Natural Gas at Statoil, “Norway occupies a strong position in a growing European gas market and the present gas sales are the highest ever. Based on existing contracts, Norway’s gas sales are set to grow by an average of nine per cent per year from 2004 to 2007 and by four per cent annually from 2007 to 2010”.

Some of the supply cornerstones, like Russia and Norway, will see declining production during the period from 2015 to 2030, and this will make Europe more dependent on imports. Bjørnson says that “authorities at a national and European level can make positive contributions to supply security by having predictable fiscal frameworks and a regulatory regime, which promotes the elimination of bottlenecks and the development of new capacity”. Supply security is now a high priority within the EU, but Europe has still not managed to transcend national priorities to get a Pan-European framework in place.
The pipeline network is there as an important infrastructure, and it is being constantly extended, but without a common fiscal and regulatory regime in place, the bottleneck remain.

European gas consumption
The United Kingdom is the biggest natural gas consumer in Europe with 98.3 bcm (billion cubic metres) in 2004, according to preliminary figures from Eurogas. Germany follows next with 89.8 bcm, Italy with 78.4 bcm, France with 48.1 bcm and the Netherlands with 42.9 bcm. Total gas consumption in Europe increased by 3.3 per cent last year, and it is worth a note that this happened during a period with limited economic growth and fairly warm weather conditions.

More and more European consumers see the environmental and economic benefits of using natural gas. However, the main reasons for the increased consumption, despite the limiting factors noted above, is the continuous increase in the number of customers. At the end of last year 95 million customers were connected to the European natural gas grid, which represents more than 240 million people using natural gas in the area.

The growth was the strongest in countries like Luxembourg, Spain, Portugal and Greece with growth rates between 10 and 23 per cent, while countries like Denmark, Finland, Hungary and Slovakia showed a slight decrease. Current predictions are for around 2.0 per cent increase in consumption per year in the coming 50 years.

Such a growth will increase dependency on gas imports and perhaps follow the trend from 2003 to 2004, where the amount of imported gas increased from 215.4 bcm to 227.5 bcm or around half of the total consumption.
As noted earlier Norway’s total gas sales for export may reach 120 bcm per year sometime in the next ten years.

In addition to sales from the Norwegian Continental Shelf come the gas volumes used for injection in Norwegian fields, as well as production of power for operating field installations and transportation systems. Of these the gas injection is the biggest.

The injection allows bigger oil production on important fields like Oseberg, Statfjord, Åsgard, Gullfaks, Njord, Snorre. Visund and Grane. Altogether 37.7 bcm was used for injection and another 3.7 bcm for power production in 2003. However, the better part of injected gas can be recovered at a later stage.

New production
Norway has two huge gas fields under development; the Snøhvit in the Barents Sea and Ormen Lange (with Hydro as operator). Snøhvit will export 5.67 bcm annually as Liquefied Natural Gas (LNG), mainly to the United States but also to Europe, principally to France and Spain when it gets on stream sometimes in 2006. Ormen Lange will eventually be connected by pipeline via Norway to Easington in the UK. When the field is on stream in 2007, it should cover around 20 per cent of UK natural gas requirements. The unprocessed wellstream is piped directly to Nyhamna in Norway (see map) for processing and export. After Snøhvit (with satellite Albatross) there is the potential in the Barents Sea.

//Petter Arentz