+------------------------------------------------------------------------------+
Norway's $186 Billion Gas Loss to Cement Russian Grip on Supply
2011-01-14 00:01:02.1 GMT
By Marianne Stigset and Ben Farey
Jan. 14 (Bloomberg) -- 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.
--Editors: Jonas Bergman, Will Kennedy.
To contact the reporter on this story:
Marianne Stigset in Oslo at +47-22-99-61-09 or
mstigset@bloomberg.net
To contact the editor responsible for this story:
Will Kennedy at +44-20-7073-3603 or
wkennedy3@bloomberg.net;
