For more than a decade British Gas plc and its predecessor, British Gas Corp., have tried to sign up more gas supplies from the Norwegian North Sea.
The path has not been easy. In the mid-1980s, after agreeing on terms and volumes to import gas from Sleipner field, British Gas suffered humiliation of seeing the contract vetoed by the British government. However, the company made no secret of its desire to acquire Norwegian gas when political conditions were right.
Last year the situation in the U.K. government appeared to be changing. British Gas began discussions with the Norwegian Gas Negotiating Committee (GFU) for 500-800 MMcfd of Norwegian gas with deliveries starting in 1995 of 1996.
TALKS BROKEN OFF
Now British Gas has walked away from the negotiations, merely telling the GFU, made up of the three Norwegian oil companies--Den norkse stats oljeselskap AS, Norsk Hydro, and Saga Petroleum--it did not like the price on the table.
While the Norwegians may have been too optimistic in their price expectations, there are factors other than price behind the British Gas decision.
Under pressure from the Office of Fair Trading, British Gas will have to reduce its presence in the U.K. industrial contract market. Until delicate negotiations over the future of this part of the company's business are complete, the size of future gas requirements will be uncertain.
British Gas was not, the only U.K. company trying to sign up supplies from the Norwegian North Sea. National Power, Britain's est electricity generator, reached an outline agreement with the GFU to buy 212 MMcfd of gas starting in the mid-1990s.
National Power and its most influential competitor, PowerGen, have ambitious programs to build combined cycle generating capacity during e rest of the decade and have been casting around for long term gas, supplies. More recently, PowerGen began preliminary talks to buy Norwegian gas, although if, has not given an indication of the volumes that may be involved.
National Power has been waiting for nearly 9 months for British' government approval of its Norwegian contract and may have to wait a little longer while the Department of Energy thrashes out a gas import policy with the infinitely more influential British Treasury.
DOE is inclined to approve the contract on the grounds that players in a free market should have the right to import gas. Having looked at the implications for Britain's trade balance from importing additional Norwegian gas, Treasury is not so sure.
STAKE IN ELECTION
National Power could use a decision before this year's British general election. While the free marketers of the governing Conservative party find it difficult to make up their minds on gas imports, a change of administration would almost certainly bring yet another government veto.
The Labor party has strong reservations about using gas as power station fuel because that reduces the market for the local coal industry. Once in power, Labor would be inclined to reject plans for new gas fired power stations regardless of whether supplies come from British or Norwegian sources.
Copyright 1992 Oil & Gas Journal. All Rights Reserved.
