8 minute read
Europe Energy Review
By Tsvetana Paraskova
Another record in European natural gas prices, acreage awards and development plans on the Norwegian shelf, and the results of the major offshore wind auction in Scotland were the key themes in Europe’s energy in the past month.
Oil & Gas
Natural gas prices in Europe surged to a fresh record-high at the end of 2021, and continued to be volatile at the start of 2022, driven in opposite directions by an influx of LNG cargoes and persistently low Russian supply.
At the same time, major gas and LNG traders such as Shell said they would benefit from the high prices. Shell expects its trading and optimisation results in the Integrated Gas division to be significantly higher compared to the third quarter 2021. However, Shell’s Oil Products Trading and optimisation results are expected to be significantly lower than the third quarter 2021.
Norway offered in January 53 new production licences on the Norwegian continental shelf in the licensing round APA 2021—the annual exploration round in the most mature areas on the Norwegian shelf. The 53 production licenses include 28 in the North Sea, 20 in the Norwegian Sea, and five in the Barents Sea. A total of 28 different oil companies, from large international companies to smaller Norwegian exploration companies, were offered shares in one or more of these licenses, while 15 companies were offered one or more operatorships.
“This award is an important contribution to maintain future exploration activity and to make new, profitable discoveries,” said Minister of Petroleum and Energy Marte Mjøs Persen.
Equinor was awarded 26 new production licences, 12 licences as operator and 14 licences as partner.
“We continue an active exploration strategy but focus on maximising value creation overgrowth and volume. At least 80 per cent of our exploration resources and investments will be concentrated around existing infrastructure – so-called near-field or infrastructure-led exploration,” said Jez Averty, Equinor’s senior vice president for subsurface in Exploration & Production Norway.
Norway reaped record-high revenues from its oil and gas resources last year, the Norwegian Petroleum Directorate said in its annual overview of activity on the shelf.
“The combination of high production of oil and gas from a total of 94 fields, significant demand and high commodity prices led to a historically high level on the State's export revenues from petroleum. Much of this is due to record-high gas prices,” the directorate said.
Production in 2021 was around 4 million barrels of oil equivalent per day (boepd), slightly up from 2020.
Five fields started production in 2021 – Duva, Yme (older field which was restarted), Solveig, Martin Linge in the North Sea, and Ærfugl in the northern Norwegian Sea.
Eight development plans (PDOs) were submitted in 2021, and companies are expected to submit dozens of PDOs this year, the directorate said.
Lundin Energy AB and AkerBP have reached an agreement under which AkerBP would buy the oil and gas business of Lundin Energy, through a statutory merger, to create a leading European independent E&P company.
bp, which currently holds a 27.9% interest in Aker BP, welcomed the proposed deal.
“We welcome and support this proposed acquisition, which will strengthen and significantly enhance the long-term future of Aker BP and our continuing relationship with Aker,” bp chief executive Bernard Looney said.
Equinor announced in early January it had discovered oil in the Troll and Fram area in exploration wells in the Toppand prospect. Preliminary calculations of the expected size indicate around 21–33 million barrels of recoverable oil equivalent.
“We also regard this discovery to be commercially viable and will consider tying it to the Troll B or Troll C platform. Such discoveries close to existing infrastructure are characterised by high profitability, a short payback period and low CO2 emissions,” said Geir Sørtveit, senior vice president for exploration & production west operations.
Neptune Energy announced in mid-January first gas production from its operated Adorf Z16 development well in the municipality of Hoogstede in north western Germany.
Low-Carbon Energy
Crown Estate Scotland announced on 17 January the outcome of the application process for ScotWind Leasing, the first Scottish offshore wind leasing round in over a decade and the first ever since the management of offshore wind rights were devolved to Scotland.
Crown Estate Scotland selected 17 projects out of a total of 74 applications. The selected projects have now been offered option agreements which reserve the rights to specific areas of seabed. A total of just under £700 million will be paid by the successful applicants in option fees and passed to the Scottish Government for public spending. Major oil and gas firms, as well as power and renewables companies, had their bids selected in ScotWind, including consortia led by bp, Shell, Scottish Power Renewables, and Vattenfall. Five of the projects, including bp’s, are for fixed offshore wind technology, while the others will be floating.
“Today’s results are a fantastic vote of confidence in Scotland’s ability to transform our energy sector,” Simon Hodge, Chief Executive of Crown Estate Scotland, said.
“In addition to the environmental benefits, this also represents a major investment in the Scottish economy, with around £700m being delivered straight into the public finances and billions of pounds worth of supply chain commitments. The variety and scale of the projects that will progress onto the next stages shows both the remarkable progress of the offshore wind sector, and a clear sign that Scotland is set to be a major hub for the further development of this technology in the years to come,” Hodge added.
bp’s Looney commented on the successful ScotWind bid.
“But we’re not stopping there. We will make Aberdeen our global operations centre for offshore wind – so we have the best people and skills to do the job. And we plan to expand electric vehicle charging and produce green hydrogen in the country. All together we expect that to support up to £10 billion of investment,” Looney added.
RenewableUK’s Deputy Chief Executive Melanie Onn said, commenting on the ScotWind leasing process:
“Overall it’s a massive economic boost for the whole country at just the right time. These projects will attract billions of pounds from private investors, which will create thousands of skilled jobs and allow us to maximise supply chain opportunities all around the UK. It also underlines the need to speed up the planning process, so that we can connect these offshore wind farms faster across the UK to meet our targets for 2030 and beyond”.
The Port of Cromarty Firth hailed the massive expansion of the Scottish offshore wind sector that will follow the ScotWind leasing round as “a game-changing opportunity for the Highlands and Scotland.”
said PoCF chief executive, Bob Buskie.
The UK government launched in January a new programme, backed with £5 million in government funding, to help develop innovative technologies to produce hydrogen from sustainable biomass and waste through the so-called BECCS (bioenergy with carbon capture and storage).
EDF Renewables UK has announced a joint venture partnership with renewable project developer DP Energy, to generate up to 1 GW of low-carbon green energy in the Celtic Sea from the proposed ‘Gwynt Glas’ floating offshore wind project. The project is likely to span English and Welsh waters and is expected to provide power for approximately 927,400 homes.
Lightsource bp and Portuguese gas utility Dourogás have agreed a green hydrogen joint venture to invest in solar and hydrogen infrastructure in Portugal. The partnership will explore the potential of eight green hydrogen sites.
Hero Future Energies and Ohmium International announced in early January a strategic partnership to develop and build 1,000 MW of green hydrogen production facilities in India, the UK, and Europe.
RWE and Northland Power have joined forces to co-develop a 1.3 gigawatt (GW) cluster of offshore wind farms in the German North Sea.
thyssenkrupp will install a 200-MW green hydrogen facility for Shell in the port of Rotterdam under a contract which will see thyssenkrupp Uhde Chlorine Engineers engineer, procure, and fabricate a 200 MW electrolysis plant based on their large-scale 20 MW alkaline water electrolysis module.
First construction work for the electrolysers will likely begin in the spring of 2022. Shell’s final investment decision to build the ‘Holland Hydrogen I’ projXect is expected this year, after which the intended start of production will be in 2024, thyssenkrupp said.
