European energy security: The future of Norwegian natural gas production
Introduction
In 2008, total Norwegian gas production was 99 billion cubic meters (bcm), and Gassco, the Norwegian pipeline operator, carried 97 bcm of gas to the UK and continental markets. (NPD, 2008a) Current potential capacity in the Norwegian pipeline system is about 120 bcm/year. Norway's Snøhvit gas project differs from other Norwegian developments in that the liquefied natural gas (LNG) concept has been chosen as the method of export. With a 21% share of EU gas imports in 2006, Norway is the second largest supplier of natural gas to the EU, only surpassed by Russia with 41% of EU gas imports. The third largest supplier was Algeria, with 18% share (NPD, 2008b).
The production of natural gas within the EU peaked in 1996. Thereafter followed a production plateau, and, in 2004, production entered a state of decline (IEA, 2008a). There is little hope of reversing this trend since production by the major producer, the UK, is plummeting by 8–10% per year. The UK and the Netherlands produce 70% of EU gas output, and gas production in the Netherlands peaked three decades ago and have been at a slightly declining plateau level ever since. In the Groningen field, more than 60% of the estimated recoverable gas reserves initially in place have already been produced (Lyle, 2006). To this should be added that the production from the fourth largest producer in the EU, Denmark, is expected to enter a state of decline within the next two years (DEA, 2007).
The International Energy Agency (IEA (2008a) expects total natural gas output in the EU to decrease from 216 bcm/year in 2006 to 90 bcm/year in 2030. For the same time-period, EU demand for gas is forecast to increase rapidly. In 2006 demand for gas in the EU amounted to 532 bcm/year. By 2030 it is expected to reach 680 bcm/year. As a consequence, the widening gap between EU production and consumption requires an 87% increase of import volumes between 2006 and 2030, see Fig. 1.
The Norwegian Petroleum Directorate (NPD), have on several occasions communicated that Norwegian gas production will continue to increase substantially from today's level of 99 bcm/year to 125–140 bcm/year within the next decade (NPD, 2008b; Harrison, 2008). In its publication World Energy Outlook 2008, the IEA also published an optimistic forecast for future Norwegian gas production. In its reference scenario, Norway's gas production in 2015 will be 121 bcm/year, with a slow increase to 127 bcm/year by 2030 (IEA, 2008a). A similarly optimistic view is reiterated by the IEA in The Natural Gas Market Review 2008, where it states that Norwegian exports by 2020 are “likely to be around 120 bcm […] although the resource base could probably supply more” (IEA, 2008b).
According to BP data (2008), Norway is already the fifth largest natural gas producer in the world, and the world's third largest natural gas exporter. However, Norwegian gas reserves ranks only at 12th place, thus indicating that Norway is exploiting its reserves at a comparatively high extraction rate. To give some perspectives it is of interest to study recent years’ development of natural gas production in the largest gas producer within the EU, the UK. Gas production within the UK peaked in the year 2000 at an annual production of 108 bcm, having produced 50% of the estimated ultimate recoverable resources (URR). Then followed what can more or less be characterized as a production collapse in 2000–2007 with gas extraction plummeting by 33%, and the declining production trend is expected to continue (DECC, 2009).
Europe's declining natural gas production will result in an increasing importance for future Norwegian supplies of natural gas to the EU. However, it is vital to recall the recent collapse for UK natural gas production, of which the overwhelming part is produced in the UK sectors of the North Sea, just as the Norwegian part of the North Sea is the dominant gas production area of Norway. These two issues combined with the limited amount of recoverable reserves present in Norway, consequently make it of interest to examine how realistic official forecasts for future Norwegian natural gas production are. The ambition with this article is to present forecasts for total Norwegian natural gas production as well as for the amounts of gas delivered to the European markets by pipeline.
Initially in Section 2 of this article, the geographical distribution of the three main petroleum prolific regions of the Norwegian continental shelf is described. The different regions’ resources of natural gas and their degrees of maturity are then depicted. The figures of recoverable resources and other gas resource categories used as parameters in the forecasts are presented and justified. In Section 3 the construction of a model for natural gas production from fields as well as for aggregate of fields is given in detail. The estimations of parameters used for the forecasts in Section 4 are described and motivated. In Section 4, forecasts have been made using the model created in Section 3, and describe potential scenarios for future Norwegian natural gas production. Finally, key findings and conclusions are formulated.
Section snippets
The resource base of Norway
There have been petroleum activities in most areas of the North Sea for nearly 40 years and petroleum discoveries along Norway's continental shelf are becoming increasingly smaller in size. The region is consequently experiencing diminishing infusions of additional new recoverable reserves, i.e. maturing much more rapidly than forecasters such as IEA and NPD, had predicted only a few years ago. Consequently, concerns have been voiced from the oil industry. At an industry meeting in January
Methodology
The scenarios for the future natural gas production potential for Norway have been modeled utilizing a bottom-up approach, building field-by-field, and then adding production from contingent resources and finally undiscovered resources. In order to achieve as high accuracy as required by the scope and aim of the article, individual modeling has been made for 24 giant and semi-giant Norwegian fields. In order to forecast the production profile for an individual giant natural gas field a Giant
Results
In this section, the highest and the lowest production forecasts for total Norwegian production are presented. In addition the highest and the lowest production forecasts for total Norwegian gas production exported by pipeline are described. Finally, the different outcomes for combinations of the development and resources scenarios described in Section 3.5 have been listed in Table 10, including forecasts that have not been visualized in Fig. 12, Fig. 13.
Fig. 9 shows the forecast from
Key findings and conclusions
The purpose of this article has been to present forecasts for the total Norwegian gas production as well as the amounts of gas delivered to markets by pipeline. As has already been shown, all major Norwegian giant gas fields have been put into production and, with the exception of Ormen Lange and Snøhvit they have already reached their planned production level. The High Case undiscovered resources estimate requires that another 1875 bcm of gas are to be discovered. This is more gas than the
Acknowledgements
The authors would like to thank Simon Snowden for proofreading the manuscript. The authors also wish to thank Colin Campbell and Jean Laherrère for their support and perceptive advice. The work had financial support from the Energy Delta Research Center of the University of Groningen, the Energy Delta Institute, Groningen, Vostok Nafta Investment Ltd., Lundin Petroleum Ltd. and Lundin SA.
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