Text size adjustment
Hold down the Ctrl key (PC) or Cmd key (MAC) and press "+" to enlarge or "-" to reduce the text size.
Bjørn Vidar Lerøen is an author and commentator specialising on oil and gas.
Oil nation Norway needs a gas strategy – at least if the country is to maintain the positions built up in the European market since its first deliveries came ashore in Germany during 1977.
Contrary views exist. Some maintain that Norwegian gas will meet stronger competition and lose ground in an energy market experiencing rapid change.
Supplies from new sources – not least US shale – and growing quantities of renewable energy are eating into market share. Coal is and will remain a competitor in some places. That could make investment in new gas projects uncertain and harder to finance.
Norway’s petroleum industry is pursuing a high-profile campaign to emphasise that gas offers major climate benefits by comparison with coal.
The most frequently cited statistic is that Europe’s annual carbon emissions would rise by 300 tonnes if coal replaced the gas delivered by Norway.
It might therefore seem paradoxical that the oil companies prefer to hunt for oil, but the arguments there are clear. Crude is easier to handle, primarily in transport terms, and gas has traditionally be regarded as less profitable.
At the 2018 ONS oil conference in Stavanger, Equinor announced a strengthened commitment to the NCS. Plans call for 20-30 exploration wells a year, and an active search for gas.
This strategy has a higher risk profile, which indicates that the biggest player on the NCS will be looking at reservoirs with a lower probability of discoveries.
Executive vice president Arne Sigve Nylund, responsible for Equinor’s involvement on the NCS, says that large quantities of gas still lurk beneath the seabed off Norway.
Given the reserves currently proven, the NCS will be unable to offer long-term gas supplies at today’s high level for very many more years.
At some point in the 2020s, supply capacity will decline because the old source fields which have contributed to steadily growing Norwegian gas production are in their late-life phase.
This will mean a substantial decline in the gas flow to the Kårstø terminal north of Stavanger in the early 2020s. Unless Norway gives priority to finding more reserves, the following question will become highly relevant: who is responsible for empty – and ultimately rusty – pipelines?
Equinor’s renewed strategy for the NCS could mean more than putting gas in the transport system.
Norway’s offshore adventure began with oil. That was what it wanted to find. The country talked about oil companies, oil workers, oil policies and the oil economy.
There was nothing wrong with that, because a lot of oil was discovered. So was a great deal of gas, but using “oil” to describe this big new industry created mental images which influenced attitudes and priorities.
Even when the topic is gas, the Norwegian petroleum minister continues to be presented as the “oil minister” at meetings and conferences.
Gas developed in the shadow of oil, even though the NPD noted in its early analyses that resources on the NCS probably split 60-40 in favour of the former.
When Norwegians looked into the future during the early years, they saw that gas would be playing at least as large a role as oil within three decades.
Arve Johnsen, the first CEO of former state oil company Statoil, designated the 21st century as the century of gas on many occasions.
He wanted gas to be priced on a par with oil. An equal quantity of energy should command the same market price regardless of the form it took. This was achieved with Statfjord and Heimdal, but not later.
In some contexts, gas came to be viewed as a waste product accompanying the oil. It has been and continues to be flared in large quantities in a number of oil-producing countries.
Norway made an important value choice at any early stage by prohibiting such flaring. That was one of 10 key policy objectives set in the early 1970s, and has been followed ever since.
The NPD has played and still plays a key role as a driving force for optimum recovery. Troll is a good example, with gas output being curbed to maximise oil production.
However, the opposite approach was taken with Frigg and Snøhvit. In both cases, recovery concentrated exclusively on gas and the oil was lost.
It must not be forgotten that the huge gas reserves in Troll were considered marginal when first proven. Large oil resources in thin zones under the Troll gas were also seen as marginal.
What has primarily characterised the development of production from the NCS is that much became more. Recovery turned out to be a lot higher than had been thought possible.
That translated in turn into significantly large sales volumes and revenues for both companies and government. Gas sales have exceeded the most optimistic forecasts.
New production records are set for this commodity year after year, and annual output now exceeds 120 billion cubic metres.
Most of this is transported by pipeline, with some exported in ships from Hammerfest as liquefied natural gas (LNG). The energy quantities involved are enormous.
When an LNG carrier loading at the Melkøya liquefaction plant reaches 75 per cent capacity, its energy cargo equals annual output from the big Alta hydropower station in northern Norway.
Sales from Snøhvit had to be adapted to big changes in the gas market, given that the field was primarily developed to meet US demand.
The Norwegian gas sellers had contracted to deliver 10.4 billion cubic metres per annum to the Cove Point LNG terminal in Maryland. Then came the shale gas revolution.
With Cove Point converted for exports, the deal to take Snøhvit gas was cancelled. New outlets were found in both Europe and Asia, but competition has become much tougher in recent years.
Gas discoveries are normally seen as riskier than oil finds. The Sleipner fields are a case in point. In 1985, the Sleipner East licensees agreed to sell their gas to the UK.
However, the Thatcher government maintained it had enough gas on its own continental shelf and rejected the deal. This decision came as a shock to Norway.
The British had bought the gas in Frigg and got this piped to St Fergus in Scotland, and Norway took it more or less for granted that they wanted more.
Nevertheless, the Norwegians landed their biggest victory as gas exporters the following year with the sale of Troll gas to continental buyers – and with the Sleipner volumes thrown in.
British interest in Norwegian gas had not disappeared for ever. Sale of the Ormen Lange gas in the early 2000s proved a new and important breakthrough in the UK market.
Philip Lambert, who heads the internationally recognised Lambert Energy Advisory consultancy, has great faith in Norwegian gas and provides the following example.
Norway currently meets about a quarter of UK gas consumption, and has thereby reduced the amount of greenhouse gas released in Britain by more than Norway’s own emissions.
Carbon emissions from the UK are at their lowest since 1894, thanks to the combination of reduced coal consumption, more use of gas and increased renewable energy.
Coal continues to be used, but in much smaller quantities than before. Britain’s last coal mine closed just before Christmas 2015. Norwegian gas is defined as part of the UK’s energy future.
Norway has enough gas pipelines. The challenge for the years to come will be to secure resources to transport through them.