Norwegian Continental Shelf: Maintaining Resources
Some call it the base of Norway's so-called petroleum economy: the Norwegian continental shelf.
At Flame in Amsterdam, the Netherlands, Erik Johnsen, Deputy Director General, Norwegian Ministry of Petroleum and Energy, provided an overview of what has been happening on the continental shelf, where in 2013 he said 60 exploration wells had been drilled, one-third of which had proved resources, which he said was quite good.
In terms of discoveries of gas, Mr. Johnsen said that 32-55 BCM had been found, one-third of total oil and gas discoveries, which could be considered disappointing because Norway was depleting more than it found. “On the other hand, if you also add in the upgrading of existing proven resources, we maintain the resources – at the end of the year, we have at least as much as what we started with and that's good.”
According to Mr. Johnsen, EUR 25 billion was invested in 2013. Cost levels, he said, were a challenge.
Regarding Norwegian supply potential in the case of European supply disruption of natural gas, he said, “Norwegian potential is clearly limited on a short-term basis.”
On a daily basis, he said Norwegian producers could increase production by 10-15%, which will not solve any problems, but still had positive aspects for the market. “The limitation is the transport capacity,” he offered. “We could produce more if export capacity in the pipelines were higher.”
The flexibility of Norway supplies came from two major Norwegian oil and gas fields, according to him: the Troll field and Ekofisk.
Mr. Johnsen showed delegates what he termed the “Norwegian flame,” a graph of the country's gas production outlook until 2025, but whose trajectory looks like a finger swipe from 2015 until 2025.
“You see that we have increased our production over the last 10-15 years.”
Of a couple of peaks and downturns in recent years, at or exceeding 100 BCM/annum, he said these were a result in producers' flexibility in producing over a period of time. He recalled, “The first peak was in 2010, when it was very cold in Europe, with price signals giving incentives to produce more. The next peak was unusually cold weather in 2012 – again, Norwegian producers contributed, while last year was a more normal situation.”
Regardless, he pointed out the overall continuous increase in production.
The “flame” on his graph he said was an illustration of the potential developments in Norway.
“We will see some increase in production in the next 5 years or so,” he commented. “Up to 2020 we will see a reduction. The development of new production will crucially depend on the successes in exploration that are taking place and also the potential for opening up new areas.”
Of total Norwegian resources, Mr. Johnsen revealed a pie chart that showed the total resource base of approx. 6.0 TCM comprised of undiscovered (1.5 TCM), produced (1.9 TCM) and remaining discovered (2.7 TCM). Norway's gas resources include from the North Sea (where more than 50% of resources are located), Norwegian Sea and Barents Sea.
He said, “We have produced only 30% of what we expect to find. So it's still in a relative development phase.”
The Barents Sea, he said, was highly immature but with a number of exploration wells. “We still are at the start.”
In terms of field developments, Mr. Johnsen said there was very brisk activity: “We have 10 stand-alone fields under development with production starting within the next 5 years.”
Regarding this, he said there were many tie-backs to existing fields and from discovery to production it took approx. 2-3 years. “It's facilitated. We have a very strict third party access regime for the use of facilities in other fields, which makes this simpler. And then we have major revitalizations of old fields.
Turning to the development of the Norwegian Sea, he said the start-up of production in the area would take place in 2017, following EUR 7 billion of investments in the field and infrastructure.
“The major field is Aasta Hansteen: 50 BCM and substantial prospects around. It's the world's biggest Spar platform, floating with ties to the sea bottom in 1,300 meters of water depth.”
Additionally, he said, was the Polarled pipeline, which crosses the Arctic at the Polar Circle and is approx. 500 kilometers in length. It went down to a place called Nyhamna, which was showing about a 15% capacity increase.
Mr. Johnsen said a study was presently taking place in the Barents Sea, initiated by the system operator Gassco, with participation from 26 oil and gas companies participating, looking at all available technologies for transporting gas from the Barents Sea.
The main options for that, he said, were LNG - continuing with one presently available train, adding trains or offshore LNG - or a pipeline going south to the main system, which would have additional capacity by 2020.
He commented, “Obviously, if this were to eventually go into the decision phase, the choices between the market flexibility of LNG, or you might say the cost efficient solution for the European market by pipeline. This is a real choice and signals from Europe are not necessarily very good for considering to increase capacity into that market, but this is the decision for the future.”
The resource potential from the Barents Sea, he recalled, was 1.1 TCM but only a small proportion of that had been discovered so far. “We need to discover more,” he stated.
According to Mr. Johnsen, a delimitation agreement was reached by Norway with Russia in the Barents Sea in 2011, making the southern portion of it open for exploration. “We've had a public hearing on the 23rd licensing round and the Ministry's studying the results.”
He was not able to give specifics on the timeline for that, but said, “Irrespective of when we invite applications, and allocate licenses, we're talking about a few years and then we've determined that discovery and development of such resources will not take place before the 2020s, so this is a long-term activity.”
“We do not see the need for any major increased export pipeline capacity; we have capacity of around 130-135 BCM, plus LNG – that's sufficient. On the other hand, you see tie-ins being built from fields to the existing system and on the extensions northwards to new areas: the Norwegian and Barents Seas.”
In closing, Mr. Johnsen highlighted the strength of Norway's regulatory regime, noting that it had low tariffs.
Drew Leifheit is Natural Gas Europe's New Media Specialist.