The supply of gas from Norway's Ormen Lange field is vital to ensure gas supply meets demand in the UK over the next decade and beyond. The following are some of the issues surrounding this gas project.
Norway's export project - Ormen Lange
The Ormen Lange is a huge gas field 120km off the coast of Norway. It was discovered in 1997 and is being developed by Norsk Hydro. Once production is underway the operatorship of the field will pass to Shell, which is scheduled for November this year.
In 2005, Norway was the 7th largest producer and 3rd largest exporter of gas in the world. Gas production in 2006 was around 88 billion cubic metres (bcm). This is predicted to increase to over 120bcm by 2010, with the Ormen Lange field accounting for much of the increase in production. The current capacity in the Norwegian pipeline system is 100 bcm, which will increase to 120 bcm when the Langeled pipeline has been completed. Currently Norway exports to four receiving terminals on the Continent (two in Germany, one in Belgium and one in France) and two terminals in the UK (St Fergus and Easington). The Norwegian gas transport system is extensive with 7800 km of pipelines. Norway has concluded a number of intergovernmental treaties with neighbouring countries including the UK to govern the rights and obligations over these pipelines.
UK landing terminal- Easington plant
The start of production is likely to meet this deadline with the early completion of the Easington onshore gas processing terminal (approximately 27 miles south east of Hull in England) and the successful first test of a production well carried out in July of this year. Centrica (responsible for operating the gas terminal) has announced that its nitrogen-injection plant at Easington is to be completed before the original 1st October date. This is the final piece to be completed before deliveries from the Norwegian Ormen Lange gas field can begin.
The Easington plant was identified to meet the UK's lower calorific natural gas specifications, which is achieved by injecting nitrogen. The plant will be the destination point for the pipeline running from the Ormen Lange field, via Nyhamna, Norway. The pipeline is split into two sections, Langeled North and Langeled South, and covers the 1,200km from Nyhamna to Easington. This makes it the longest sub sea pipeline in the world.
- National Grid Forecast
The latest national grid forecast looks at gas supply and demand up until 2015/2016. This forecast shows that the UK became a net importer in 2004. This was partly as a result of falling UKCS production, which is no longer sufficient to meet consumption. By 2016, the UK is predicted to be around 80% import dependent. To meet such a change in the way gas is supplied to the UK, projects like the pipeline supplying gas from the Ormen Lange are very much needed. Additionally, the UK will need to invest in greater gas storage facilities to help ensure security of supply during peak demand periods.
- Impact on the UK
The UK's annual gas production in 2005 was 86 bcm and in 2006 was just over 84 bcm. There will be a large increase in terms of supply to the UK that will result from the completion of the Easington plant, and therefore the pipeline from the Ormen Lange to the UK. In the first year the supply will flow at around 30 million cubic meters a day (mcm/day), rising up to 50 mcm/day by April 2008 before settling at 70mcm/day by 2009. This equates to about 20% of the UK's gas demand.
Although this pipeline will increase the import supply of gas into the UK, this is unlikely to reduce the price of gas significantly. This is unlike the large price drop last year when the market was flooded temporarily due to the testing carried out on the Langeled South pipeline. The price of gas is not expected to fall significantly because the pipeline will not increase the amount of gas on the UK market in the long term. This is because of the reduction in supply from the UKCS and coincides with the overall transformation of the UK from a gas exporter to a gas importer.
Conclusion
The Ormen Lange project will result in the UK having a greater share of Norwegian gas, compared to the current situation whereby the majority of Norwegian gas goes to Continental Europe. The Ormen Lange project and the gas storage projects throughout the UK will lessen the effect of the diminishing reserves of the UKCS.
It is obvious that the pipeline from the Ormen Lange field is vital to satisfy the increasing energy needs of the UK. It has the potential to supply 20% of the UK's imports and with the UK becoming a net importer of gas and UKCS supplies continuing to fall, being connected to such a huge field helps secure supply. However, in the long run, the UK will still need to further invest in gas storage facilities for gas imports from important gas exporting countries like the Netherlands, Russia and Algeria to ensure the long-term security of gas supplies in the country.
Leon Moller
leon.moller@shepwedd.co.uk