WATCHING THE WORLD MIDGARD DEVELOPMENT AT ISSUE

With Roger Vielvoye from London Norway's three company committee that negotiates foreign gas sales on behalf of the whole industry normally manages to keep disagreements on policy behind locked doors and away from the ears of potential customers. But Saga Petroleum's decision to promote early development of the Midgard gas/condensate project as a source of gas for a sales contract under negotiation with British Gas plc has changed all that. Midgard lies in the Haltenbanken area off

May 27, 1991

3 min read

Norway's three company committee that negotiates foreign gas sales on behalf of the whole industry normally manages to keep disagreements on policy behind locked doors and away from the ears of potential customers.

But Saga Petroleum's decision to promote early development of the Midgard gas/condensate project as a source of gas for a sales contract under negotiation with British Gas plc has changed all that. Midgard lies in the Haltenbanken area off mid-Norway.

A SHOT FROM STATOIL

State owned Den norske stats oljeselskap AS has come up with sharp public criticism of Saga.

Saga, Statoil said, is guilty of irresponsible behavior in linking an early development of Midgard and completion of negotiation of a contract with British Gas this year so Midgard production can start in 1995-96.

Saga was brusquely told that talking about deadlines for a contract undermined the committee in its dealings with British Gas. A Statoil spokesman told a local newspaper that Saga had shot itself in the foot--definitely not the kind of language normally used by Norwegian companies about each other in public.

But the dispute over Saga's early schedule for Midgard development raises questions about the efficiency of a national gas negotiating committee in which the three Norwegian companies--Statoil, Norsk Hydro, and Saga--act on behalf of foreign companies with stakes in gas reserves.

In the past, the system has worked moderately well from the Norwegian viewpoint although big foreign gas reserve owners might not echo that sentiment. But it works only as long as the Norwegian members have similar objectives.

The current dispute hinges on Statoil's determination to meet all the growing European demand for Norwegian gas before the turn of the century from North Sea reserves. Current gas exports of 2.6 bcfd could rise to 5.8-6.7 bcfd by 2000.

Most of this new business will be accommodated by start-up of production from Troll and Sleipner fields. Statoil argues that judicious use of associated gas and satellite fields in the North Sea can meet the balance.

Such a policy will make the best use of the existing infrastructure in the North Sea and bring the biggest returns for reserve owners, Statoil says. Midgard, it adds with Norsk Hydro's agreement, is a development for the early part of the next century.

STRATEGIC LINK

Saga claims the British Gas negotiations present an ideal opportunity to make the strategic 410 mile link between Haltenbanken and the existing North Sea pipeline network to continental Europe and the U.K.

In doing so, Midgard would become the pivot point for all gas development projects that undoubtedly will take place on Haltenbanken during the next 20 years and make Saga the key gas operator in the area.

Ultimately, a decision on whether North Sea or Haltenbanken gas meets any new contract with British Gas will rest with the Norwegian government with political lobbying from pressure groups favoring a mid-Norwegian solution pitted against the undoubted influence of Statoil in government circles.