This report has been produced by Elite Sections for distribution with OIL & GAS JOURNAL
The Future of Gas
www.elitesections.com
The entire content of this sponsored feature has been produced by Elite Sections and The Buzz Business
The global fuel of choice Cleaner fuel and reliable, low cost energy supplies are driving the global demand for gas
A
with its environmental Diversifying our benefits and long-term gas supply will availability,â€? says Torstein benefit citizens and Indrebø, Secretary Genbusinesses across eral of the International the EU. Gas Union (IGU). “There Mr. GĂœNTHER OETTINGER is an urgent need to conEuropean Commissioner trol smog levels in cities, for Energy which are causing serious health problems. Most Norway’s Minister of Petroleum and Asian policymakers see gas as one of the Energy Tord Lien explains. “Gas is the most cost-effective ways to improve air cleanest of the fossil fuels and a necessary quality.â€? partner for intermittent renewable power As well as being cleaner burning, gas has generation. Norway’s explicit goal is to be lower carbon dioxide content than other a secure supplier of natural gas to Europe fossil fuels, helping countries reduce their for many years to come.â€? greenhouse gas emissions. Meanwhile, “We must promote a common energy unlike renewable energy, policy serving our joint policy objectives: gas can also produce Most Asian policompetitiveness, sustainability and power both cheaply and cymakers see gas security of supply,â€? GĂźnther H. Oettinger, reliably, with no need as one of the most European Commissioner for Energy says. for constant sunshine, cost-effective ways to “Diversifying our gas supply will benefit wind or government improve air quality. citizens and businesses across the EU.â€? In subsidies. Mr. TORSTEIN INDREBĂ˜ January, Oettinger proposed reforms to the As well as assuming Secretary General of Emissions Trading System in Europe that an increasing role the IGU will increase the price of carbon and help in Asia, gas is also a gas compete better with coal. This will help central component of eliminate one unintended consequence of “The global outlook for gas is positive the European energy strategy. “Europe is the US shale gas revolution; the export as gas is increasingly regarded as one of the highly concerned about climate change of excess coal at rock bottom prices to solutions to meet global energy challenges, and the security of energy supply,â€? nyone wondering why global demand for natural gas is growing at such a rapid rate – by 60% from 2010 to 2030, according to Shell – need only step out into the streets of a large city in an emerging economy, such as Beijing, Mumbai or Bangkok, and breathe in the air for the most obvious answer to their question. Urban pollution in the developing world has now reached crisis levels. But by replacing power plants that use coal and oil with plants that use natural gas, the cleanest-burning fossil fuel, policymakers can reduce the emissions of the particles and the nitrogen and sulfur oxides that have become the bane of big city life.
“
“
�
Europe, challenging the position of gas in the European power market. “There is currently a flaw in the market,� says Remi Eriksen, Executive Vice President & COO of DNV GL, which is a member of the IGU and a leading technical advisor to the global oil and gas industry. “The true cost of burning hydrocarbons is not reflected in the price, and in Europe coal has replaced both gas and renewables in the last year, which is obviously not the ideal situation. Policymakers understand that they have to incentivize the use of gas in Europe, so the true cost of burning hydrocarbons needs to be incorporated in the price.� Following the merger between DNV
“
Policymakers understand that they have to incentivize the use of gas in Europe
�
Mr. REMI ERIKSEN Executive Vice President & COO at DNV GL
and GL in 2013, DNV GL now covers all stages of the gas industry: upstream, pipe-
lines, regasification, distribution and consumption. Our customers can “The merger adds capacity import LNG in a much and competence especially shorter period of time at the downstream end and at a much more of the gas value chain,â€? competitive price Eriksen says. “We now Mr. SVEINUNG STĂ˜HLE address the full value chain.â€? Chief Executive Officer Strong global demand at HĂ–EGH LNG for gas is now driving the rapid development of the Storage and Regasification Units (FSRU). innovations needed to produce new supplies. Sveinung J.S. Støhle, President and DNV GL has launched a recommended Chief Executive Officer at HĂśegh LNG, practice for the entire life cycle of shale which is in the vanguard of the develgas extraction, based on risk management opment of FSRUs, says the company principles, industry best practices and is seeing strong interest from power standards. At the end companies in emerging markets in South of 2013, it initiated a America and Asia. Joint Industry Project “Instead of spending $1.5 to $2 billion to develop international and taking six or seven years to build a standards and guidelines land-based regasification facility, we can for fields of so-called deliver a solution in two and a half years sour gas, which is toxic, that will cost significantly less,â€? Støhle highly corrosive and says. “Our customers can import LNG in explosive. a much shorter period of time and at a The industry is also much more competitive price, which is developing new and why the market has embraced it as the more cost-efficient forms of bringbest solution.â€? ing gas to market, such as Floating
“
�
FOR JAMES, SAFETY DOESN’T HAPPEN BY ACCIDENT. One part of the bigger picture. Safety matters. Especially when you’re developing the regulatory framework for a country’s entire oil and gas industry. James Brown and his team at DNV GL are working closely with the authorities in Brunei to establish robust regulations that meet complex challenges. Our expertise covers the entire oil and gas value chain, drawing upon deep international experience and local expertise to provide technical advice that makes a real difference. We take a broader view on the sector and work relentlessly to ensure that every part we play impacts upon the bigger picture. DNV and GL Noble Denton have joined forces to become the leading technical advisor to the oil and gas industry. As DNV GL, we help companies become safer, smarter and greener. Among our 16,000 employees, 5,500 experts are dedicated to solving complex safety, reliability and performance challenges in oil and gas projects and operations.
Four  Floating  Storage  and               5HJDVL¿FDWLRQ 8QLWœV IRU GHOLYHU\ DQG HDUO\ 7ZR RI WKH XQLWV RQ ORQJ WHUP FRQWUDFWV WR 3HUXVDKDDQ *DV 1HJDUD ,QGRQHVLD DQG .ODLSHGRV 1DIWD /LWKXDQLD 2SHUDWLRQ RI D ÀHHW RI VL[ /1* &DUULHUV LQFOXGLQJ WZR UHJDVL¿FDWRQ YHVVHOV $ KLJKO\ VNLOOHG RUJDQL]DWLRQ ZLWK D ZLGH UDQJH RI FRPSHWHQFH JDLQHG WKURXJK /1* RSHUDWLRQ VLQFH
Discover the broader view at dnvgl.com
SAFER, SMARTER, GREENER
New frontiers for exploration From Africa to the Arctic, Statoil is leading the hunt for new gas resources to bring to market
G
any other company. “We naturally tend to take the gas to the market where it has the highest premium.” To take advantage of this globalization of the gas market, Statoil has been pioneering a new shipping route, last summer sending gas from its Snøhvit LNG plant in northern Norway to Japan via the Northern Sea Route above the coast of Russia. “This gives us more Development of a options and more global LNG market flexibility in our LNG gives interesting marketing,” Bjørnson strategic and marketing says. At the same time, perspectives for us as Statoil has invested a producer, heavily in pipelines to Mr. RUNE BJØRNSON customers in Europe, Senior Vice President of natural gas at STATOIL and was one of the first gas suppliers to sever the link with the oil price. Thanks partly to recent successes As well as investing in shipping in exploration, the Intl. Energy Agency capacity and opening up new trade currently estimates that conventional routes for gas, operators are also jostling and unconventional recoverable gas for position in upstream developments, resources can supply over 250 years often in regions which were barely on the of the world’s gas demand, at today’s radar of international oil companies just rate of consumption. Furthermore, the a decade ago. worldwide adoption of LNG technology Statoil itself is now weighing up its means that operators are now able to ship development options for Tanzania, where these new volumes of gas to wherever the in the last two years the company has demand is greatest. made a series of major gas discoveries. “Development of a global LNG market Statoil estimates that there could be up gives interesting strategic and marketing to 20 trillion cubic feet of natural gas in perspectives for us as a producer,” says Tanzania’s Block 2, an offshore license Rune Bjørnson, Senior Vice President that it is exploring in partnership with of natural gas at Statoil, which in 2013 ExxonMobil. made more oil and gas discoveries than
“
Kharyaga field in Russia
Drilling ship “Discoverer Americas” in Tanzania
Paul Joynson-Hicks - AP - Statoil
”
Tanzania is just one of a series of gas discoveries off the coast of Eastern Africa that have turned the region into one of the most promising hydrocarbon provinces in the world. In Mozambique alone, Eni and Anadarko have discovered around 65 trillion cubic feet of estimated recoverable natural gas; from 2018 the country could become the world’s third largest exporter to LNG and it’s not only in the developing world that new gas provinces are being opened up. In Europe, Statoil is spearheading the development of gas resources above the Arctic Circle, perhaps the last remaining frontier for oil and gas exploration. In 2013, the Norwegian government approved Statoil’s development plans for the Aasta Hansteen field, including a 480 kilometer pipeline that will incorporate spare capacity for other discoveries in Norway’s northern seas. “We are continuing to develop both fields and infrastructure to remain a reliable supplier of gas,” Bjørnson says. Perhaps the most dramatic spike in global gas availability is set to come from not from remote regions of Africa and the Arctic, but from the US itself. Last year Statoil, which has a major presence in the Marcellus shale gas area, began transporting shale gas by pipeline to Manhattan, putting it in the vanguard of a trend that is set to transform the US into one of the world’s largest exporters of natural gas and change the face of today’s gas market.
Svein Are Enes - Statoil
lobal gas markets are poised not only for a rapid increase in demand but also for a surge in supply, as international oil companies and their state-owned partners race to develop new discoveries, from the southern waters of the Indian Ocean to the frozen depths of the Arctic.
EUROPEAN INDUSTRY Powered by Norwegian gas
Gas production from the Norwegian Continental Shelf can supply European industry with reliable, cost-efficient energy with as little impact on the environment as possible. Norwegian gas is available today, and for decades to come. Learn more at statoil.com
Asia prepares for surge in LNG supply
Shale gas and hydrates the key to long-term security
New sources of Liquefied Natural Gas are set to transform the Asian energy market
Las Raffan in Qatar
As well as importing increasing volumes of LNG, Asia is exploring its own unconventional gas reserves
As well as new developments in Africa The Northern Sea Route gives our LNG and Australia, one of strategy more options the largest sources of and more flexibility LNG supply to Asia is expected to be the US, Mr. TORD LIEN Norwegian Minister of which before its shale gas Petroleum and Energy discoveries was investing heavily in regasification terminals and pipelines As well as reducing the region’s gas price, to receive LNG from Asian suppliers such as exports from the US will also add to Asia’s Qatar, the world’s largest exporter of LNG. security of supply. “Having LNG from the Many of these terminals in the US are US creates a level of confidence for key now being re-engineered to become decision makers that gas is available,” says export terminals for LNG leaving the Rune Bjørnson at Statoil. continent. New LNG export facilities are Thanks to shale gas, the US has now also being planned along the Pacific coast, overtaken Russia to become the world’s including Alaska and Canada, providing largest producer of natural gas. However, easy access to Asian markets for North Russia itself is also moving to build a American gas. Over the course of the position as a major exporter of gas to Asia, last year, the US Department of Energy both by pipeline and as LNG. At the end authorized three terminals to export LNG of 2013, Russia ended the monopoly that to countries with which the US does not state-owned Gazprom used to enjoy on have a free trade agreement. Observers LNG exports, opening the way for smaller say that even after adding the costs of producers such as Rosneft and Novatek to liquefaction and shipping, the arrival of enter the export market. Whereas Russia this new supply of gas on the Asian market has traditionally exported its gas to Europe, should force regional gas prices lower.
“
”
Harald Pettersen - Statoil
A
s Asian policymakers turn to natural gas to meet the energy demands of their growing middle classes and to tackle the urban pollution crisis, energy companies are investing billions of dollars in new LNG production facilities and infrastructure. These investments are poised to take the world’s gas supplies to the fast growing Asian markets where they are most needed, and to make gas even cheaper and more competitive in the region. “New supply capacity to the Asian market from the Caspian region and Russia, and increased LNG supplies from Australia and Qatar, combined with more domestic supplies in Asia, will enhance competition and most likely bring the Asian gas price level closer to that of other regions,” IGU Secretary General Torstein Indrebø says. “There will be a lot of new gas supply coming onstream, meaning that the current $18 per million btu level that we are seeing in Asia will likely come down,” Remi Eriksen at DNV GL says. “Australia is developing a range of LNG projects, and in 8 to 10 years there will also be gas coming out of Mozambique and Tanzania.”
New supplies of international gas are not the only source of supply for Asia’s increasing gas demand; countries across the region are also beginning to explore their own potentially giant reserves of unconventional gas. While the current focus of the gas market is on the impact of shale gas from the US, countries such as China are now eyeing up the potential of Asian shale gas. “The big global impact from unconventional gas will really take off if China and other large energy consuming countries succeed in their efforts to produce shale gas,” IGU Secretary General Torstein Indrebø says. “Estimates indicate that China has shale gas reserves at the same level as North America.” Royal Dutch Shell is leading the way
in exploring China’s unconventional gas reserves, spending around $1 billion a year in the country’s upstream. “The enormous increase in gas demand is driving Chinese authorities to plan growth on all fronts in parallel: increasing domestic production, increasing pipeline and LNG imports,” Shell’s upstream international director Andrew Brown said last year. “This diversity of gas supplies increases the robustness of supply security in China and results in a higher share of gas in the energy mix.” In the longer term, the potential of methane
hydrates in Asia could dwarf the promise even of shale gas. In 2013, Japan, which is almost entirely dependent on energy imports, recorded a world-first, successfully extracting natural gas from a giant offshore reserve of frozen methane hydrates. “Japan is taking the lead on hydrates at the moment,” says Remi Eriksen at DNV GL. “This is an area where we are going to increase our knowledge and identify technology gaps to see where DNV GL can contribute to develop these new required technologies.”
Gazprom and independent producers are now looking eastwards to Asia’s faster growing markets. For much of the last decade, Gazprom has been in negotiations with China National Petroleum Corp (CNPC) to pipe gas from new fields in eastern Siberia to the fast growing Chinese market, which so far has depended on LNG and on gas from Turkmenistan. Gazprom needs to move fast; CNPC has already reached a deal to partner Novatek in developing its giant Yamal LNG project in the Arctic, while Rosneft also has an agreement with CNPC and is eyeing the Asian export market eagerly. Asian buyers stand to be the greatest beneficiaries of intense competition between Russian gas producers trying to access their market. Further south, according to some forecasts Australia could leapfrog Qatar to become the world’s largest exporter of LNG by the end of this decade. In the coming years, Australia’s export capacity is set for significant expansion, with an estimated $200 billion of projects under construction,
including the Chevron-operated Gorgon project, which carries an estimated pricetag of $54 billion. In addition to traditional LNG projects off the west coast of Australia, the industry is investing in a series of giant projects in Queensland in eastern Australia that will convert onshore coal bed methane (CBM) into LNG and then export it to Asia. Australia is also the site of perhaps the gas industry’s most exciting technological innovation; Floating LNG, pioneered by Shell. Whereas the costs of developing Australia’s offshore reserves using onshore facilities have surged, use of Floating LNG technology can minimize these costs and make Australian gas more competitive with the new gas supplies that are imminent from the US, Russia and beyond. When complete, Shell’s Prelude FLNG will be the largest offshore floating facility ever built, allowing Shell to produce natural gas 200 kilometers off the coast of Western Australia, turn it into LNG and then transfer it directly to the ships that will transport it to customers. By reducing onshore project
costs and the environmental footprint of an LNG development, FLNG can open up opportunities for countries looking to develop small or remote gas resources that were previously seen as uneconomic. At the same time as new sources of upstream supply are developed, Asian countries are also investing in new LNG import terminals. In 2013, Singapore and Malaysia began importing LNG, while Vietnam and the Philippines are considering joining the club and South Korea, Thailand, China and India are all expanding their capacity. Sveinung Støhle at Höegh LNG says the company is also seeing strong demand from Asia for its Floating Storage and Regasification Units (FSRUs). “The main driver of the Asian market is to import gas to produce electricity. These economies are growing by 5% to 7% per year and they need to keep up with LNG production,” Støhle says. “More than half of the projects in the pipeline are in Asia, as by using an FSRU they will save time and money.”
Höegh LNG vessel GDF Suez Neptune
Paving the way for global gas innovation INTSOK, Strategic role will continue
A reliable and strong reputation
SJUR E. BRATLAND, Managing Director INTSOK
BRIAN BJORDAL, Chief Executive Officer GASSCO
Q: What would you as INTSOK like to see from the new government to support growth internationally? A: First of all, I would like to see stability and long-term prospects. That is the main point and primary interest for the whole industry. Q: In the gas sector, what are now the main markets? A: Of course, everyone is looking at the latest gas discoveries. We have a delegation coming back from Tanzania and Mozambique and there are great hopes in these areas. We are going to try to use our stability, experience and reliable technology as a way to promote ourselves outside. Part of the globalization we have seen shows that it is not good enough to say, “I’m from Norway and we had success in the North Sea.” We have to adapt to the local markets, aand that is what we are doing. Q: What are current challenges for INTSOK and for the sector? A: We need to put the best available technology to work and we need to have better recovery rates. We have been
TCM, A carbon capture leader FRANK ELLINGSEN Managing Director Technology Centre Mongstad Q: What are the major lessons that you have learnt from the full-scale carbon capture project? A: The importance of testing related to decision making. Decision makers such as CEOs, if they wish to put the CCS into effect correctly, need to understand what are the acceptable risks related to any decision that they make thoughout the entire process. In our first year of operation we have influenced three main areas. One of these risk areas is environmental. The second is technology and the third area is the financial risk; financial because we have been looking at the planning and engineering element of the CCS, as well as the construction and start-up through to operation. The overall reduction of these risks may well be the most important thing that we have done here.
able to cope with the challenges faced before and globalization is actually a good thing because it promotes competition. I think INTSOK will have a very important role in the future to help regional business learn, listen and adapt. In that sense, I am optimistic for the Norwegian industry. As long as we have continued support from the government, our task is to survive in the short-term for that role and INTSOK is even more important now than it has been, even if the Norwegian market will be the largest offshore market in the next four years as we are helping the industry understand the common challenges. Also, I would like to mention our high tax rate, but also to remember that we have a very flat salary structure in Norway so our R&D people are known to be very cost-efficient. When you have innovative and creative people you always have a bright future.
Q: Can you give us a quick overview of how Gassco has contributed to the Norwegian gas success story? A: I think Norway has always been very conscious of being slightly ahead of things. The startup of Gassco was one of many examples of how we adapted to the future and this is important. It is not being the strongest or most intelligent that helps one survive, it is the ability to adapt to a changing world. We have not had any very serious incidents and we have managed supply reliability. We have not been headline news, and that is something that pleases me. This is an indicator of success; as it is all about reputation. Norway has a very reliable reputation and with our excellent history, we have been able to build upon these strengths and therefore to grow over these 12 years. Q: Are you concerned that the low gas prices are going to delay investments and projects in gas infrastructure? A: Obviously, it could. We have seen that before. We saw it during the financial crisis. There are many aspects that we cannot control but I am not too concerned at this
point, but it is true that the low gas prices could cause financial trouble or create a cost issue. Also, the cost in Norway is relatively high and to maintain the competitiveness of Norwegian gas is always an issue in my opinion. We always have to consider this and make judgments in order to adapt. Norwegian gas exports in any event represent a substantial contribution to energy supplies in major European countries, and remain stable. Q: What drives you to get up in the morning? A: Deep down I am driven by other people; they really inspire me. I am privileged because I work with people in Gassco and so many others in other companies that have enormously interesting backgrounds. I enjoy this and the challenges that we share. I like working with others and that is what keeps me going.
Added value for the continued development of CCS
Technology makes companies relevant
Innovation in decision making
EINAR STEENSNAES, Chairman of the Board GASSNOVA SF
SVENN IVAR FURE, Strategy and Business Development AKER SUBSEA AS SVP
PÅL HELSING, Executive Vice President KONGSBERG Oil and Gas Technologies
Q: What are the main achievements of the CLIMIT Program and what are the main priorities? A: The Research Council of Norway and Gassnova share responsibility for this successful program. We take care of the testing and demonstration projects and the Council takes care of the research. I think a lot of experience and results that contribute to the well-functioning, cost effective CCS technology have been supported by CLIMIT and this has really added value to its development. We spend about $31.7 million per year on that program and by taking into account what has been achieved we hope CLIMIT will continue its contribution at the current level. We consider the CLIMIT Program along with TCM as two very important components that have contributed to the successful commercial development of CCS technology.
Q: Why do you think Norway has become a leader in technology, research and development? A: One example can be seen from our company which is investing a lot in subsea technology. We have had tremendous growth in this area, and our subsea revenue has more or less doubled since 2010. Also, most of the new projects that we are selling now contain some new technology and this is what makes a company relevant in the world today. There is a quest in the industry to increase uptime, recovery and make products more installationfriendly with lower costs. Aker Solutions excels at this as operators look at more challenging environments. There are some very clear benefits to being leaders in subsea. When you are being evaluated, you can provide more functionality and value to customers.
Q: Exploration and production spending is increasing globally, how do you work with upstream clients to develop new technology? A: Kongsberg works to develop technology across a number of areas. We try to get the end users involved in all our development programs and we are currently carrying out a major operation with BP that is an initiative to reduce unproductive drilling time. This has been a three year iniciative aimed at integrating analysis and data with our own operator’s experience. The aim is to provide the right information at the right place and at the right time. This is an effective decision support tool and the good news is that we have some pilot programs that have already shown some very good results.