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For some time, Norway's national energy champion Statoil has been running a costly advertising campaign in the UK's quality press pushing the message of its natural gas as a low-profile, long-term and almost inevitable presence in the UK.
Despite niggling doubts about the picture long-term--including inside the top echelons of Norway's gas industry--the latest massive investment program at the giant Troll field will push the project's life span out further than previous targets to 2063 and may well help seal the deal.
Last month, Statoil ran a huge double-page spread in the UK's Daily Telegraph newspaper featuring a gas pipeline emerging from the sea and plugging directly into the UK power grid. "Gas from the Norwegian Continental Shelf can supply millions of Britons with power," it read. "Established UK-Norwegian energy links make gas a reliable and efficient source of energy."
Statoil and its partners in the Troll field, the biggest gas field in Norway, have now announced they are investing $2 billion on two more compressors to expand gas output and extend its longevity. This new spend is the final phase of the expansion of the Troll A platform. The compressors will come into action in 2015 and will enable Troll A to produce 120 million cubic meters/d of gas (around 43.8 Bcm/year) until 2018, and to maintain output at 30 Bcm/year until 2024. Further out, the compressors will rejuvenate Troll and keep the field producing gas until 2063.
Before the Troll investment announcement, the Norwegian Petroleum Directorate (NPD) already had painted a positive picture of the country's gas production going forward, saying in January it saw output rising to 109.1 Bcm in 2011 from 106.4 Bcm in 2010. In 2015 production is seen up at 112.2 Bcm in the wake of fresh discoveries coming on stream.
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But Norway cannot afford to be complacent when it comes to its position as second-biggest gas exporter in the world and the largest foreign gas supplier to the UK. After Troll, the Ormen Lange field--in which Statoil and fellow Norwegian state-controlled group Petoro together hold 65%--is the second-largest Norwegian gas field. But technical difficulties, including problems interfacing with the Norwegian national grid, have seen its gas supplies occasionally sputter, forcing up gas prices.
Although it can supply up to 20% of the UK's daily gas demand, doubts also have emerged as to its future production potential. Last year the NPD cut its estimates of Ormen Lange's recoverable reserves by about one-quarter, sending shockwaves through the industry.
Earlier this year, operator Shell announced it had completed the drilling of appraisal well 6305/4-2 S--part of the delineation of the Ormen Lange field--and said the results had been disappointing. The well was the eighth appraisal well to be drilled on the field, and while energy officials said it would have no impact on its reserve estimates, analysts said it was a blow nevertheless.
"This is a disappointment for Ormen Lange without a doubt," one analyst said. "There have been several downgrades of Ormen Lange's reserves over the course of drilling. When it comes to production it is of course capped, so the result will not have an impact on production for the time being."
Gas largely has been seen as the future of Norway's energy sector, in sharp contrast to crude production, which has been in gradual decline. Although some doubts persist about the gas sector due to the state of Ormen Lange, among other things, some fresh developments in 2011 have taken off some of the pressure. In July, Norway's energy ministry said it saw big potential in Total's Norvag gas discovery at the country's northernmost drilling operations in the Norwegian part of the Barents Sea.
The ministry said the license partners were hoping the find would contain as much as 250 million barrels of oil equivalent. And Statoil has this year announced several gas and oil fast-track projects, linking lesser deposits to existing producers and reducing the development-to-production time by about half.
Last month, Statoil announced it had won approval for the development of its Stjerne gas and oil field and Vigdis Nordost oil field in the North Sea at a cost of about $2 billion, which will be linked to existing fields. Statoil has pledged to press more of its fast-track deposits, building on the success of Sjterne, Vigdis Nordost and other fast-track projects already announced.
In the meantime, the extension of Troll's life span is a welcome boost to the sector. It holds about 40% of total gas reserves on the Norwegian Continental Shelf and Statoil identifies it on its corporate website as the "very cornerstone" of Norway's offshore gas production.
Securing Troll's future going forward then seemingly secures Norway's as a gas producer. But Norway's government and the gas industry also have warned that current gas production of some 100 Bcm/year could nosedive in a decade or two unless huge new finds are made.
--Patrick McLoughlin in Copenhagen
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