Offshore Europe

Ormen Lange set for long haul

Gas from mid Norway's giant Ormen Lange field will head to the UK through Europe's longest offshore trunkline. Operator Norsk Hydro and its partners have opted for a 1,200-km route from Aukra to Statoil's Sleipner complex in the North Sea, then veering southwest toward the English east coast and existing gas terminals at Dimlington/Easington. Plans for the UK and Norwegian sections will be submitted respectively to the authorities in June and October.

Ormen Lange's licensees decided against renting existing trunklines in UK waters for the final stretch to avoid the risk of export constraints. They calculate capacity of at least 60 MMcm/d will be needed for this project, probably more when new fields along the proposed route are factored in. Output from Ormen Lange should lift Norway's overall gas exports by 25%, Hydro said, pushing the country up to second place in volume terms behind Russia.

The project timing coincides with a sharp downturn in the UK's indigenous gas production foreseen from 2004 onward. Wood Mackenzie predicts in a new study that by 2015 the UK will suffer a shortfall in its needs of 95 bcm/yr, barring outside intervention. Across Europe as a whole, the potential contractual supply deficit at that point is estimated at 300 bcm/yr.

Over the next seven years, the analysts suggest, Norway and Algeria will step up their gas sales to north and south Europe in particular. During the same period, LNG will also increase its share of the European market, climbing to 12% in 2010 compared with 7% in 2000.

Bargain blocks in 21st round

Britain's energy ministry has slashed North Sea acreage fees in a bid to stimulate interest in the UK's 21st offshore licensing round. Some 612 blocks are on offer, with submissions due by May 7. Under the terms of the new "promote" license, newly acquired acreage will cost $25/sq km for the first two years of a four-year exploration/development license. This is a 90% reduction on the more typical figure of $250/sq km. The move, which follows consultations with over 60 organizations late last year, is partly aimed at attracting smaller newcomers to the UK sector. The generous terms are designed to give them time to acquire seismic and assess well targets before finalizing their drilling program. But if there is no evidence of activity after two years, the license will automatically lapse. Up to 10 blocks will be available to any bidder under the new system.

One fairly new entrant to North Sea operations is Aberdeen-based Venture Production. Chief Executive Bruce Dingwall believes more could be done to ease the ingress of independents. Speaking at a recent energy briefing in Aberdeen organized by UK Offshore Operators Association, of which he is the current president, Dingwall said, "The high cost of capital, the additional financial burden of having to provide security to cover eventual decommissioning costs, and the difficulty in finding the right staff are just some of the challenges facing new entrants building their portfolio.

"Of more general concern is the complex web of commercial interests in the North Sea that can cause costly and time-consuming delays in making and carrying out investment decisions. Simplifying asset ownership can go a long way to making business in the UKCS more effective and efficient."

In fact, BP is going out of its way to make independents welcome, as it seeks to rid itself of its former crown jewels. Following its Forties clear-out to Apache in January, French company Perenco has picked up BP's operating share in 14 gas fields in the southern North Sea for $162 million. The package includes shares in associated pipelines and onshore processing facilities at Bacton. The total production changing hands is 150,000 MMcm/d. Main assets are the Trent/Tyne complex, which BP inherited from Arco, and the nine Inde area fields and platforms, mostly from Amoco's portfolio.

Shared piles for DONG templates

Mærsk Oil & Gas has commissioned a new 10,000-ton processing platform for the Dan FG field in the Danish North Sea. The fabrication contract went to Sembawang Marine and Offshore Engineering, which is also working on a platform and living quarters for Mærsk's Halfdan complex.