WATCHING THE WORLD EUROPEAN GAS SALES

With Roger Vielvoye from London Exporting gas from the British North Sea to continental Europe has been one of the objectives of U.K. operators since the early days of offshore production. After two decades of half-hearted efforts to win approval for U.K. gas exports, the goal could be achieved late this summer, with Phillips Petroleum Co. U.K. signing to supply gas to Germany. Phillips is in detailed negotiations with Wintershall AG of Germany for gas sales from Judy and Joanne fields in U.K.

April 1, 1991

3 min read

Exporting gas from the British North Sea to continental Europe has been one of the objectives of U.K. operators since the early days of offshore production.

After two decades of half-hearted efforts to win approval for U.K. gas exports, the goal could be achieved late this summer, with Phillips Petroleum Co. U.K. signing to supply gas to Germany.

Phillips is in detailed negotiations with Wintershall AG of Germany for gas sales from Judy and Joanne fields in U.K. North Sea Block 30/7a, known locally as the J block.

J BLOCK GAS

Phillips is preparing a development plan covering the fields' 150 million bbl of oil and 650 bcf of gas reserves. The plan will be submitted to the U.K. government once a deal to supply gas to Germany is in place.

One of the key elements of the deal is transporting the gas to continental Europe. The J block is only 40 miles from the Ekofisk complex in Norwegian waters and the Norpipe gas pipeline to Emden on the northwest coast of Germany. Phillips wants to lay a short spur line across the boundary into Norwegian waters and feed its J block gas into the Norpipe system.

While Phillips operates Ekofisk area field and Norpipe, the largest shareholder in the pipeline company is the Norwegian state owned Den norske stats oljeselskap a.s. Norpipe partners had no objection in principle to handling U.K. gas but were concerned that J block gas sales will absorb most spare capacity in the system at the expense of future Norwegian gas supplies.

However, doubts about the capacity of the Norpipe system were removed when the Statoil-led Zeepipe company agreed to lay a third gas pipeline from the Norwegian North Sea to Northwest Europe. Known as Europipe, the new line is to start up in 1995 to coincide with first deliveries of J block gas.

Investors in Europipe will be looking for exports from new Norwegian gas fields after 1995 to use the new line, leaving room in Norpipe for J block gas.

While the industry appears to have cleared the way for U.K. gas sales to Germany, exports will become a reality only with a degree of political pragmatism by the U.K. and Norwegian governments.

On the Norwegian side, approval must be given to the Zeepipe project to assure that pipeline capacity is available to deliver U.K. gas to Germany. And on the British side, the Department of Energy will need to take a favorable view of British Gas plc's desire to import 485 MMcfd of Norwegian gas beginning in 1995-96 through the fast-emptying Norwegian Frigg gas pipeline.

The British government probably will want a complete renegotiation of the international treaty that covers the Frigg gas import system-something that should not cause too many problems for the Norwegians if it gives them access to the prized U.K. market.

BALANCING THE MARKET

Net result of all this industry and political maneuvering should be a better balanced U.K. gas market.

British Gas and U.K. power generators needing long term gas purchase contracts would be able to turn to Norway for their requirements. At the same time, U.K. operators with small reserves to sell would have a precedent that would allow them to turn more readily to customers in continental Europe.