Offshore Northern Europe Norway Slates Massive Expansion Of Offshore Gas Pipeline Grid

Brian Bjordal
Statoil
Stavanger

Norway existing and Committed Offshore Gas and Trunk Lines (35304 bytes)

Norwegian Gas Provinces (68918 bytes)

Norwegian Natural Gas Exports - 1994 (100515 bytes)

Norwegian Gas Market Shares (32043 bytes)

Plans to expand the transportation network for Norwegian gas to meet expected increasing demand in Europe will involve a massive increase in offshore trunk line capacity.

Because anticipated demand for Norwegian gas in Europe cannot be met by boosting throughput of existing pipelines, the late 1990s will be a period of pipeline construction and development project decisions.

Gas transportation from the Norwegian continental shelf to continental Europe has grown over the last 20 years, spawning an increasingly complex and integrated pipeline network.

The gas export grid began with construction of two stand-alone trunk lines, Norpipe and the Frigg system (105529 bytes), which were brought into operation in 1977. A third, the Statpipe line (105529 bytes), was started up in 1985.

Recent additions include the Zeepipe I trunk line, first used in 1993, and Europipe I (105529 bytes), due to begin operations this year.

The Zeepipe IIA and IIB pipelines are scheduled for construction over the next few years, while the NorFra trunk line (105529 bytes) has recently been sanctioned (see table). NorFra will be the world's longest offshore pipeline.

Other probable additions to the grid are a third line to Germany, Europipe II (105529 bytes); a loop line to carry gas around Ekofisk field after it has been redeveloped; a link from the Haltenbanken area of the Norwegian Sea to the North Sea grid; and a Northern North Sea fields export line.

Over the years the number of fields delivering gas through the grid and the committed sales volumes have increased substantially.

Future coordinated operation of platforms, terminals, and pipelines will increase the technical and commercial complexity still further.

Pipeline demand

The current surge for new pipeline systems is largely driven by Troll and Sleipner fields' 1986 gas sales agreements and newer contracts. New supply fields need to be developed along with new transportation systems.

Beyond the turn of the century, when the envisaged set of new pipelines is completed, the pipeline infrastructure will be fed from three main sources: the Southern North Sea, in the Ekofisk and Sleipner areas; the Northern North Sea, including Troll, Oseberg, Statfjord, and Gullfaks fields; and the Haltenbanken area off mid-Norway, which includes the Smoerbukk and Midgard discoveries.

Norway is presently committed to supply a total of 62,000 billion cu m of gas to continental Europe, which represents approximately 20% of anticipated European gas consumption.

Known gas reserves could support a supply level on long term contracts far above the committed level, with the giant Troll field being the dominant source.

Field developments

Various fields on the Norwegian continental shelf have recently been competing to deliver gas under new sales contracts with Gaz de France, as well as Germany's Mobil Erdgas-Erdol AG and Verbundnetz Gas AG (VNG) of former East Germany.

The three companies plan to buy a combined 9 billion cu m of gas/year for 20 years, with an overall value of about 100 billion kroner ($15 billion) at today's prices.

In June 1994, however, the Norwegian Storting (parliament) resolved to postpone a decision on which field or fields should deliver these supplies until autumn 1995.

Reflecting a view that new production capacity will not need to be identified before then, this delay has given licensees in the relevant fields an additional year to come up with competitive development plans.

Development prospects under discussion by Norway's Gas Supply Committee (FU), which embraces 12 oil companies, are currently at different stages of planning.

Postponing the choice of supplying fields was particularly beneficial to companies planning to develop discoveries on the Haltenbank in the Norwegian Sea and gives them a chance to supply gas to Europe from the turn of the century.

Coordinated sales

Deliveries to Gaz de France, VNG, and German Mobil will quickly rise to their plateau of about 9 billion cu m/year of gas.

In addition, delivery fields have to be allocated for 4.5 billion cu m/year of extra gas sold under the Troll sales agreements. And a further 5.3 billion cu m/year will be needed since all the options in these contracts were exercised by the deadline in May 1995.

The total volume of extra gas requiring allocation to delivery fields could reach some 20 billion cu m/year. The FU has to agree by year end on a common recommendation for contract and delivery fields to meet new contracts, ahead of a decision on required new production capacity.

Coordinating Norwegian gas sales is an important instrument in achieving optimal management of Norway's offshore resources. The authorities have to decide which group of companies is responsible for a contract (the contract group) and which field should deliver to it (the delivery field).

When the authorities approve a contract group, these licensees commit themselves to invest in the production and transport capacity needed. The delivery field is usually picked after the contract group has been nominated.

Existing sales contracts will increase annual Norwegian gas exports from roughly 25 billion cu m/year today to almost 60 billion cu m/year after 2000, which demands new offshore investment.

Established in autumn 1993, the FU makes recommendations to the Ministry of Industry & Energy on contract and delivery fields for new gas sales contracts as well as extra transport capacity.

Members of the committee are representatives of the main licensees and operators on the Norwegian continental shelf: Statoil, Norsk Hydro AS, Saga Petroleum AS, Total Norge AS, Norske Shell AS, Norske Conoco AS, Elf Petroleum Norge AS, Esso Norge AS, Phillips Petroleum Co. Norway, Neste Petroleum AS, Norsk Agip AS, and Mobil Development Norway AS.

Their proposals are intended to secure the best possible resource utilization and the highest returns. One aim is to avoid developing new transport and production systems until optimal use has been made of existing infrastructure.

Cooperation

The FU's work has nurtured keen competition between groups of companies over supplying gas and prompted these partnerships to develop better and more cost-effective development concepts.

But increased coordination and cooperation between licensees and operators has also been promoted by government. One conclusion has been that development economics are likely to favor gas fields with a lot of oil or condensate to yield early revenue.

The hub of Norway's system for transporting gas to European markets lies in the North Sea. Development of the Haltenbank would demand more investment than developing further North Sea fields, not least because of the need to lay extra gas trunk lines.

Smoerbukk, Smoerbukk South, and Midgard, which are to be developed together by a group led by Statoil and Saga as the Aasgard project, are likely to be the first Haltenbank gas developments. Substantial oil and condensate reserves in the Smoerbukk fields improve development prospects.

Rivals in the Northern North Sea are Hydro's Oseberg and Statoil's Gullfaks and Huldra fields. Further development of the massive Troll reservoir is another contender.

New production capacity will not be needed until Oct. 1, 1999, at the earliest to cover delivery commitments under new and existing contracts, since Troll and the Sleipner fields will meet requirements from 1996-99. Substantial gas reserves not tied to any contract have been available until now in Troll, and minor additional investment is required to produce these volumes.

Undecided pipelines

In addition to pipelines approved for development, a major new pipeline system to Germany is planned, with a latest start-up in year 2000, under the name Europipe II. Its connection point to the existing grid has not been decided.

The total length of Europipe II may be 1,400 km, if extended to tie in the Haltenbanken area, with a diameter of 36-42 in. There are several outstanding issues that need to be clarified before a firm decision can be made on this pipeline project or projects.

The most significant issue is field allocation under new sales contracts. This awaits final decisions concerning a development strategy for the Haltenbank gas fields. Storting is expected to decide field allocations before the summer of 1996.

Depending on the technical concept and competitiveness of the Aasgard development, a trunk line may be built more or less directly to Germany but be connected into the existing network at a nodal point in the North Sea or onshore in Norway. If a rich gas export concept is decided, the gas will be landed in Norway at either Kollsnes or Karstoe for processing, before the dry gas is exported through the grid.

Network operation

The network system will be expanded to approximately 5,000 km of offshore pipelines toward the year 2000. Since it has been generally accepted that such a network will require complicated coordination procedures and commercial agreement structures and efficient operation, the different joint ventures (NorFra, Zeepipe, Statpipe, and Norpipe) have been requested by the Norwegian Ministry of Industry & Energy to evaluate the possibility of merging all the dry gas systems into one joint venture.

The motivation is to simplify the commerce, increase utilization of existing systems, maximize economic return, and increase competitiveness of the Norwegian gas industry.

Should this concept succeed, the merger will be put into effect in time for start-up of the NorFra system in 1998.

In the next century the focuses of Norway's enormous gas production machine will probably be simplified commerce, safe operation, high regularity, and advanced tools for optimization of overall gas transport.

In this manner the network will provide the customer on the continent with the right amount of gas at the right time and maximize return to the gas owners, including Norwegian society.

The Author

Brian Bjordal holds a 1976 BSc degree in civil engineering from Heriot-Watt University, Edinburgh. He has been employed by Statoil since 1984 and was construction manager for the Statpipe fjord-crossing pipeline tunnels to Karstoe in Norway from then until 1986. From 1986 until 1991 Bjordal was manager of Statoil's pipeline inspection and maintenance department. From 1991 to 1993 he was venture manager for the Europipe line to Germany. Since 1993 he has held the position of manager for new infrastructure projects, which includes responsibility for the planning of new pipelines to the continent.

Copyright 1995 Oil & Gas Journal. All Rights Reserved.