Norway’s new energy minister Kjell-Borge Freiberg hopes the imminent startup of the major Aasta Hansteen natural gas field in the northern Norwegian Sea will spur further developments in the region.
In an interview with S&P Global Platts, Freiberg — who replaced Terje Soviknes on the last day of August — was upbeat about future production on the Norwegian Continental Shelf given continued high spending and new project approvals.
“I choose to be optimistic,” Freiberg said. “The last couple of licensing rounds have resulted in record high numbers of license awards and the government will continue to offer prospective acreage,” he said. “I am confident this could result in new significant discoveries.”
Norwegian government policy has also been a factor in the resilience of Norway’s output in recent years, Freiberg said.
The Equinor-operated Aasta Hansteen, which is set to start up this quarter, is the first gas project developed in the northern Norwegian Sea and is linked to existing infrastructure through the recently completed Polarled pipeline.
“Aasta Hansteen marks a new chapter in Norwegian petroleum history — for the first time we will deliver gas from the Arctic through our extensive pipeline system,” Freiberg said.
“Hansteen and the Polarled pipeline create incentives for further exploration and new field developments in the northern part of the Norwegian Sea, so in this regard the Hansteen field is a very positive for the NCS and future gas production,” he said.
Norwegian gas output hit a new record high in 2017 of 122 Bcm, and is expected to stay flat for another five years or so before beginning a gradual decline.
But Freiberg is optimistic that production can remain robust given the level of investment and innovation in Norway.
“The investment level is high and new projects are being sanctioned,” he said, adding that the industry was the most competitive, advanced and innovative business in Norway.
“We have a diversity of competent companies that are both willing and able to invest in exploration, development and production,” he said.
Norway has proved many doubters wrong in recent years with its ability to maintain high gas output levels.
Freiberg said this was down to a combination of geology, government policies, high investment rates, innovation and improved efficiency.
“Even after 50 years of activity, we still have a strong resource base. The government has over time maintained a stable and predictable framework where awarding prospective acreage is a key element,” he said.
“The investment level in new developments has been high over the past decade. The last couple of years’ high focus on costs, efficiency and performance within the whole value chain has given results in terms of high production regularity.”
Norway is also attracting continued interest in its exploration bidding rounds despite the average size of new discoveries having fallen in recent years.
It is looking ever further north for new finds, with exploration set to pick up in the Barents Sea in the coming years.
Freiberg said he was hopeful for the Barents Sea despite the lack of success in an initial Equinor-led campaign in 2017. “A large part of our expected remaining undiscovered resources are located in the Barents Sea. There are large unexplored areas and the province attracts high industrial interest,” he said.
EUROPEAN MARKET DYNAMICS
Norway remains a key supplier to Europe, although it expects LNG to be a strong competitive source of gas in the next two years.
The increased availability of LNG, Freiberg said, will give European gas customers “an even wider choice of potential suppliers and delivery routes, and thus an enhanced opportunity to choose among supply sources.”
In its first draft budget for 2019 published last month, Oslo said it expected European gas prices to dip due to the increased supply of LNG.
It said it assumed an average gas price for Norwegian gas exports to Europe of NKr2.05/cu m (Eur19.22/MWh) in 2019, down from NKr2.20/cu m this year.
In 2020 and 2021, the price is expected to fall further to NKr1.70/cu m.
In the period 2022-25, the government sees less LNG coming to the European market, which is expected to contribute to higher gas prices of closer to NKr2/cu m.
Freiberg said even the phase-out of the Groningen field in the Netherlands, which in 2013 produced more than 53 Bcm, is not likely to affect European supply and demand, Freiberg said.
“Phasing out Groningen will undoubtedly make the EU more dependent on gas imports. However, I do not believe it will impact the market dynamics significantly,” he said.
“Europe has over time established a robust gas infrastructure and achieved more diverse supplies from inside and outside Europe. As a consequence, gas markets have become increasingly efficient and liquid.”
Freiberg also downplayed any risks to Norwegian gas supplies to the UK after Brexit.
“Norway and the UK have an excellent cooperation in the energy field, and we expect this to continue also in light of Brexit,” he said.