Jan 14

Norway’s $186 Billion Gas Loss to Cement Russian Grip on Supply

By Curve natural gas in Europe No Comments »

Europe may face a shortfall of Norwegian natural gas as soon as 2015 after the country slashed its estimate for undiscovered resources because of a dearth of discoveries from companies such as Royal Dutch Shell Plc.

Europe’s second-largest supplier yesterday cut its estimate for gas yet to be discovered by 31 percent, or 570 billion cubic meters. That’s equal to more than five years of production at current rates and would be valued at about $186 billion based on today’s prices at the U.K’s trading hub.

“This will rack up the pressure on the European Union to develop and secure access to reliable energy,” Thina Saltvedt, an analyst at Nordea Markets in Oslo, said by e-mail. “The EU will be forced to increase imports from the Middle East and Africa to compensate for and reduce Russia’s domination.”

Shell, Statoil ASA and other companies have been finding smaller and smaller amounts or striking out in drilling off Norway, casting in doubt Norway’s status as reliable supplier of the fuel and its goal of transforming itself into a gas nation as oil production slumps. The troubles may help Russia, Europe’s biggest supplier, cement its grip on the market and provide an opening to exporters from the Middle East, where Qatar has become the largest producer of liquefied natural gas.

“It is the estimates for the gas resources in the North Sea and the Norwegian Sea that have been written down,” Bente Nyland, head of the Norwegian Petroleum Directorate, said yesterday in an interview in Stavanger, estimating a potential decline in gas production after 2015. “Our gas production will go down and other countries will pass us by.”

Undiscovered Gas
Norway’s undiscovered gas resources may total 1.26 trillion cubic meters, down from an estimated 1.82 trillion cubic meters last year. The country had total gas proven reserves of 2 trillion cubic meters in 2009.

As fields in the North Sea become depleted four decades after Norway first discovered oil, companies are moving north into the Norwegian Sea and the Arctic Barents Sea. Norway is counting on gas output to make up for declining oil production, which has dropped 50 percent in the past decade.

The “revised estimate of undiscovered reserves should be taken seriously, although it should also be remembered that it’s part of their job to be ultra-cautious in assessing the nation’s future hydrocarbons wealth,” said Patrick Heren, founder of European price-information service ICIS Heren. The implication may be that exporters in Central Asia or the Middle East will find it easier to sell their gas in Europe, he said.

Challenges
Statoil, Norway’s biggest oil and gas producer, has a goal of maintaining Norwegian production at current levels until 2020, which Chief Executive Officer Helge Lund on Nov. 3 called “ambitious.”

“Our goal hasn’t changed from what we’ve previously communicated,” Statoil spokesman Ola Anders Skauby said today. “The 2020 target is based in large part on discovered resources. The Norwegian shelf is definitely still interesting to Statoil.”

Shell drilled a dry well at the Dalsnuten prospect in the Norwegian Sea in November, a further blow to its nearby Gro discovery. An appraisal well at Gro had earlier indicated the find could be at the lower end of the 10 billion to 100 billion cubic meters estimate. Total SA also reduced the size of its Victoria field after more drilling in 2009.

Ormen Lange
“The fact that Gro didn’t deliver means that other surrounding prospects also decline and thereby the totality is gone,” said Nyland. “The question is whether Statoil will find profitability in the gas discoveries they’ve made.”

Shell last year had to cut the estimated reserves at its Ormen Lange field, Europe’s third largest, by 24 percent to about 302 billion cubic meters.

Norway may have to pin its hopes on the Barents Sea, where it’s preparing to map out an exploration area after reaching a maritime border agreement with Russia in September. Some seven to eight exploration wells are expected this year in the area, where there has been little exploration to date. So far this year, Eni SpA on Jan. 5 announced a dry well near its Goliat field in the Barents Sea, the directorate said on Jan. 5.

Norway estimates the Barents Sea holds 520 billion cubic meters and the Norwegian Sea 455 billion cubic meters in undiscovered gas resources.

“Most geologists are more optimistic than the Norwegian Petroleum Directorate about the prospects for large gas discoveries in the Arctic, where the Russians have already made a colossal find at Shtokman,” Heren said.

Source: Bloomberg

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Jan 29

Russian Gas Giant Feeling the Effects of Shale Gas

By Trevor J. Murphy energy independence 1 Comment »

The exponential potential for shale gas exploration overseas and the shale boom in the United States is forcing one of Europe’s gas giants to re-evaluate what was once considered to be a largely ambitious gas extraction project in the Arctic.

Gazprom, Russia’s biggest gas company and Europe’s biggest gas supplier, said this week they would have to reassess its plan to develop the 3.8 trillion cubic meter Shtokman gas field in the Barents Sea.  Together with partners Statoil and Total, Gazprom has planned to send as much as 90 per cent of Shtokman’s extracted natural gas to the North America, but the company admits that alternative gas suppliers and quickly developing markets for shale gas in the US and abroad is putting Shtokman development plans in jeopardy.

Andrew Neff, an energy analyst at HIS Global Insight says shale gas is “playing havoc” with Gazprom’s prices and projects.

“The potential spread of the shale gas production revolution to Europe, which is believed to have significant untapped reserves of its own, would clearly have a profound impact on Gazprom’s production and marketing strategy,” he told The Guardian.

In an interview with Russia Today television in December, a Gazprom spokesman called shale gas “a joke” and dismissed concerns that a growth in the production of shale gas would pose a threat to the company’s foreign sales.

But the reassessment of the Shtokman fields demonstrates that Gazprom is now taking the threat of shale gas and energy independence very seriously.

Over the past two years, gas exports and revenues fell dramatically for Gazprom. While high monopolistic prices and European dependency on the Moscow-based company certainly played a role in causing country’s to look elsewhere for gas, the role of shale and the desire for energy independence by some countries in Europe such as Poland has undoubtedly been affecting Gazprom.

Oddgeir Danielson, an oil and gas expert in the Norwegian Barents Secretariat, said the repeated postponement of the Shtokman project illustrates current uncertainties in that market and highlights Gazprom’s conflict with shale.

Directors at Shtokman Development will meet again on February 5, 2010 to agree on a new marketing plan for the offshore field. There is a possibility the directors may also delay a final investment decision on the venture.

SOURCES:
Alaska Dispatch: “Gazprom eating crow on shale gas?”
Barents Observer: “Gazprom might abandon Shtokman”
The Guardian: “BP chief hails American breakthrough in gas supplies from shale rocks”
The Moscow Times: “Shtokman Meeting to Consider Gas Buyers”
Business Insider: “Gazprom: Shale is a joke, and it can’t possibly compete with gas”

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Jan 06

Russia, Belarus Dispute Spotlights Continuing Need For Energy Independence

By Michaela Davies energy independence No Comments »
An energy price dispute between Russia and Belarus escalated early this week

The dispute focuses on the Soviet-era Druzhba  pipeline system that supplies 10% of the European Union’s oil.  Poland depends on the Druzhba pipeline for most of its crude oil. Germany received about 15% of its crude through the pipeline in 2008.

Russia began curbing supplies through the pipeline to Belarus’s domestic market after an oil-supply agreement between the two countries expired Dec. 31. On Monday, Russian officials said those deliveries had been resumed, but not before Belarus threatened to cut off electricity to Russia’s westernmost region if the Russians insisted on imposing a new tax on the oil Belarus processes for export.

Three years ago, Russia briefly cut oil exports to the European Union nations through a Belarussian pipeline as the two former Soviet republics quarreled over price. That shutdown, along with a January 2009 natural-gas cutoff to Europe caused by contract disputes with Ukraine, has raised doubts in Europe about Russia’s dependability as a top energy supplier.

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