Norwegian gas infrastructure agency Gassco is backing construction of a new Nkr30 billion ($5 billion) pipeline to bring to market new discoveries in the Barents Sea, saying it could be in place by 2020.
In a report presented to Norway’s Oil & Energy Minister Ola Borten Moe on Tuesday, Gassco said such a northwards extension of the country’s existing gas transport network in the Norwegian Sea could be a “good solution” that would boost upstream activity in the Barents, according to the minister.
However, the fate of the putative 1000-kilometre pipeline, which would be financed by the industry, is likely to hinge on whether Statoil decides to build a second train at its Snohvit LNG facility on the island of Melkoya, off Hammerfest, with the state-owned giant set to make a conceptual decision this spring.
If it opts to move forward with a Snohvit train two, which would open up for increased gas volumes found in the Barents to be exported by ship as liquefied natural gas, this is likely to push construction of a pipeline much farther down the road as it would become less economic.
Gassco’s NCS2020 study states that another major pre-condition for the pipeline being built is continued future demand for Norwegian gas from Europe, which aims to source most of its energy from renewables by 2050.
Norway is marketing cleaner burning and more environment-friendly gas as a transition fuel for Europe to fill a future supply gap as the continent moves away from hydrocarbon and nuclear energy sources towards renewables.
“If Europe does not make its position clear on whether it wants significant gas supplies over the next generation, then it is not inevitable that we will invest large sums in a new gas pipeline,” Moe was reported as saying by Norwegian newspaper Aftenposten.
He said Norway would then see LNG as a more flexible export option that would give it higher earnings in global markets such as Japan.
An investment decision on the pipeline will also depend on finding sufficient gas volumes, according to Gassco, which outlines in its report four possible future scenarios for as yet undiscovered resources in the Norwegian and Barents seas.
These indicate possible trends in Norwegian gas production to 2040, ranging from rising output to 2030 to a gradual fall already by the end of this decade.
“From what I believe about the Barents as a new oil and gas province, a new gas pipeline would be a sensible long-term solution that would also act as an incentive for increased exploration,” Moe said.
Norwegian independent North Energy has argued a new gas pipeline will be necessary with sufficient capacity to transport gas from future Barents finds, as well as existing discoveries Skrugard, Havis and Norvarg.
It has calculated that an investment in the pipeline would be more beneficial relative to a second Snohvit train as it would have double the capacity.
Gassco states in its report that an expansion of gas transport infrastructure in the north will be required to maintain gas exports from Norway to offset waning output from mature North Sea fields, as well as support development of the Barents as a new production province.
“In the resource scenarios that are analysed, it appears that the resource basis for a possible pipeline northwards lies in the Barents Sea, and that it would be appropriate to expand towards this area in one step, rather than with a step-by-step development,” the report states.
However, it argues against further expansion of offshore processing facilities in the north, favouring instead the use of existing onshore processing capacity that will be sufficient until 2030, and expanding it if more resources are found in the region.
Meanwhile, several Norwegian companies are discussing possible exports of gas from the Barents via the Nord Stream pipeline from Russia to Europe in the Baltic Sea, Petro.no reported.
Proposed development of the huge Shtokman gas field off Russia will require construction of new offshore and onshore pipelines, including a link from the Barents to the Baltic Sea that will be connected to Nord Stream.