The Norwegian gas infrastructure future challenges Thor Otto Lohne, Executive Vice President Sandnessjøen, 10 June 2010
Gassco s basic principles are safety, reliability and cost effectiveness Safety Reliability Cost effectiveness
Key messages 1. Alternative solutions for the Norwegian Sea have been thoroughly evaluated and decisions based on the feasibility studies will soon be made 2. Two key features will influence the development of the Norwegian gas infrastructure: Development of areas north of existing gas pipelines will require new gas infrastructure Gas production from existing fields will begin to decline in this decade
Norwegian gas production consists mostly of dry gas Gas production from NCS 2009 National consumption of gas 2009 Dry gas 103 BCM LPG 7.3 mill. tonnes Ethane (Kårstø) 0.9 mill. tonnes National dry gas consumption = 3.2 BCM, of which 1.8 BCM for offshore injection Estimated ethane consumption = 0.6 mill. tonnes Wet gas Estimated marked value*: Dry gas: 155 GNOK Ethane: 4 GNOK LPG: 32 GNOK Estimated LPG consuption = 0.8 mill. tonnes Note: * Natural Gas- 103 BCM x est. avg. price of 1.5 NOK / Sm³. Ethane: est. avg. price of 4 000 NOK / tonnes LPG: est. avg. price 4 400 NOK/tonnes Source: NPD, Statoil, Yara, SSB, broker estimates, all 2008
Current Norwegian gas transport capacity is challenged for only a few years NCS all gas resources vs existing infrastructure* Undiscovered resources could take around 10 years from discovery to production Note: * Gas volumes in the Barents Sea are not included in these figures
Existing gas processing facilities requires new feed to secure capacity utilisation 120 Rich gas production forecast - Kårstø Base case Scenario Capacity 100 80 MSm³/d 60 40 20 0 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 Year 100 Nyhamna capacity utilisation Rich gas [MSm³/d] 75 50 25 Base case Capacity Langeled North 0 Year
New gas volumes and constrained capacity in existing system drives need for new infrastructure [MSm³/d] 100 80 60 40 20 Field developments ongoing, but not decided. Volume Basis - Norwegian Sea Indicative range of other potential field developments. Evaluations not completed. New gas volumes from Luva, Onyx and Vøring need new gas evacuation solution 0 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 Contract Year Volume Basis - Åsgard Transport MSm³/d 100 90 80 70 60 50 40 30 20 10 0 Constrained volumes Area B Scenario Sum Area B Base Case ÅT capacity In addition, Åsgard Transport has constrained volumes until around 2021 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 Contract Year
Finding a gas infrastructure solution for the Norwegian Sea is challenging Vertical profile of Luva to Nyhamna Water depth, high pressure and high temperature reservoirs and gas quality lead to field development challenges Existing gas landing points at Tjeldbergodden and Nyhamna Existing gas export pipelines are Åsgard Transport and Langeled (from Nyhmana)
Overall assumptions and framework Gassco is evaluating alternative gas evacuation solutions with consideration to: Need for gas evacuation from discoveries and existing fields Holistic considerations with respect to the optimisation of existing infrastructure and the need for gas evacuation solutions for other gas resources in the area Gassco s evaluations and analysis will be used as input to: Individual companies investment decisions for gas evacuation solutions The authorities approval process for development plans (PIO) Key assumptions Three main domestic landing areas have been evaluated (Nordland, Tjeldbergodden and Nyhamna) Pipeline and LNG (liquefied natural gas) solutions have been evaluated Gas volumes that need evacuation solution are of such a quantity that an export solution is necessary (domestic demand is insufficient)
Full domestic gas offtake for fields in question is unrealistic Ethane Mill. tpa Wet gas based industry 6% ethane Ormen Lange 3,3% ethane Ethane need Cracker with similar capacity as Rafnes A field similar in size to Ormen Lange will need high ethane content to provide enough feedstock for a Rafnes cracker Dry gas based industry Ormen Lange annual gas production 24 BCM Luva assumed annual gas production 7 BCM Tjeldbergodden methanol factory annual gas need 0.7 BCM A field the size of Luva can feed more than 10 Tjeldbergodden methanol factories
Three main landing areas have been considered Going-in assumptions for landing areas 10 Harstad Nordland Possible benefits in operation of fields as landing area is in close proximity Asterix Gro / Vøring Luva Bodø Export solution either with pipeline to Nyhamna and Langeled or as LNG Tjeldbergodden Victoria Onyx Haltenpipe mna Nyhamna Domestic demand insufficient to make use of all gas and the increase in domestic demand can be catered for with existing capacity in Haltenpipe As export volumes would have to go via Nyhamna (or LNG) a direct transport solution to Nyhamna is considered more suitable Nyhamna Kårstø Spare capacity at Nyhamna and Langeled make this solution attractive
The following studies have been performed Key questions Gas evacuation solutions What gas evacuation solutions are possible, what benefits can be expected and how much will they cost? Pipeline studies What stand alone and combined pipelines to Nyhmana are suitable and how much will they cost? Tie-in studies What type of tie-ins from a new pipeline to existing Åsgard Transport are feasible, what benefits can be expected and how much will they cost? Nyhamna expansion studies What expansions are possible and how much will they cost? All work has been done in cooperation with Shell and Statoil as operators of Onyx, Nyhamna and Luva. NPD has provided quality assurance on gas volumes
The Luva field is used as basis to consider different evacuation solutions Gas evacuation options - Luva field Pipeline directly to Nyhamna Pipeline to Nordland and LNG to markets Capex A (bn NOK) 10 Capex A (bn NOK) 65 B 1 3 Pipeline to Nordland and pipeline to Nyhamna Offshore LNG Capex A (bn NOK) 25 B Not feasible 2 4 Note: A Capex unclassified, still subject to QA B Including additional capex of 4 bnnok related to field and pipeline to shore
Combined solutions and a tie-in to Åsgard transport are possible with a Nyhamna solution A Nyhamna solution: Make combined pipeline solutions possible (e.g. Luva and Onyx) Enables a tie-in to Åsgard Transport that has many positive aspects (flexibility in capacity utilization, market flexibility and quality issues etc.)
In summary - the future of the gas infrastructure in Norway After 2020 Towards 2020 Towards full utilization of gas infrastructure systems Optimizing current system while evaluating need for new investments Uncertainties related to future gas feed in gas infrastructure Decisions taken next few years will decide capacity situation in 2020 and onwards