Producers in Norway and the U.K. are moving toward their goals of increasing natural gas exports to mainland Europe.
At a recent Financial Times conference, Johan Vold, executive vice-president of Den norske stats oljeselskap AS (Statoil), said natural gas would play an "increasingly important role" in Norway's offshore industry.
He said Norwegian gas exports amounted to 26.5 billion cu m last year. By 2005, Norwegian exports based on existing commitments will increase to about 47 billion cu m/year.
"On the basis of our proved reserves and on gas projects in the development or planning phase, we believe that, if the economic conditions match the costs, Norwegian gas exports may be increased to 60-65 billion cu m," Vold said.
But investments required to provide Europe with Norwegian gas are substantial.
Troll and Sleipner fields on the Norwegian continental shelf, along with the Zeepipe and Europipe lines linking Norway with mid-Europe, are the main building blocks of the Troll gas sales agreement, the foundation for Norway's plans. Total investment will exceed $11 billion.
The Troll agreement involves about 28 billion cu m of gas and is currently the subject of negotiations between Troll field partners and the buyers.
In 1986, when the contract was first agreed, it was a buyer's market. Increasing demand in the last 2 years has changed that. Also, new taxes on gas and oil products have driven both parties back to the negotiating table. Adjustments can be called for every 3 years under the Troll contract; this is the first time parties have invoked the provision.
Torstein Indrebo of Norsk Hydro says the contract gas price is based on prices of competing energy sources, such as oil, coal fired electricity, and nuclear power,
"This means that gas prices can vary quite a lot from one market to another, even when the contracts are negotiated in the same period and under the same umbrella."
Because volumes are so large, he says, small adjustments in the gas price have a large effect.
THE U.K. STRUGGLE
The British government, soon to assume presidency of the European Commission, is pushing for access to gas customers in mainland Europe.
Meanwhile, deregulation of the U.K. gas market, which will begin with the industrial and commercial sector, has given rise to much jockeying for position among potential suppliers.
Lasmo North Sea plc is to be the first exporter of gas from the U.K., following the signing of the Markham treaty by the British and Dutch governments. Markham field holds about 700 bcf of gas reserves and straddles the meridian line separating the U.K. and Netherlands continental shelves.
First production is expected this October from the Dutch Blocks J3b and J6. The U.K. gas, from Blocks 49/5a and 49/10b, will be sold to Gasunie and Wintershall.
Alliance Gas, the U.K. gas market's newest participant, has set its sights on 15% of the 1.3 billion ($2.5 billion) industrial and commercial gas market by 1996.
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