September 13, 2007 / 10:32 AM / 11 years ago

UPDATE 2-Norway's Ormen Lange gas starts flowing to Britain

(Recasts with details, quotes, background)

By Wojciech Moskwa

OSLO, Sept 13 (Reuters) - Gas production started on Thursday at Norway’s Ormen Lange field, set to supply Britain with a fifth of its needs and make Norway the world’s second largest gas exporter after Russia.

Located in kilometre-deep waters in the southern part of the icy Norwegian Sea, Ormen Lange took $11 billion and 10 years to develop with breakthrough technology to tap the world’s increasingly hard-to-reach oil and gas resources.

When Ormen Lange reaches plateau production in 2010, gas exports from Norway will rise to 120 billion cubic metres and cover 20 percent of Europe’s needs — reassuring forecasts a day after oil prices topped $80 per barrel for the first time.

“It’s extremely important to deliver what we planned for Hydro, the licence partners and for Norwegian industry,” Tom Roetjer, Ormen Lange director for project developer Norsk Hydro (NHY.OL) told Reuters.

“Completion of this breakthrough development will make Norway the world’s second-largest exporter of natural gas,” Norsk Hydro said.

It will supply Britain through the world’s longest undersea pipeline running to Easington on England’s North Sea coast.

Royal Dutch Shell (RDSa.L), which has a 17.04 percent interest in the field, will take over as Ormen Lange production phase operator.

Danish DONG has 10.34 percent, U.S. major Exxon (XOM.N) 7.23 percent, Norway’s state-owned Petoro 36.48 percent and Hydro and its merger partner Statoil STL.OL a combined 28.91 percent.

LONG SERPENT

In Norse mythology, Ormen Lange was a giant serpent that encircled the Viking world.

For present-day Norway, it is a pioneering development in the Norwegian Sea and a technological springboard for projects further north and into the Barents Sea, to replace dwindling production from ageing oilfields in the North Sea.

Having slipped to fifth place among the world’s oil exporters, Norway wants more oil and gas exploration on its shelf to sustain an economic boom that has made the Nordic country one of the world’s richest.

“This project helps make Norway a reliable gas supplier into the future,” said John Olaisen, analyst at brokerage Carnegie in Oslo. The pipeline will also provide spare capacity from the 2020s that could be used to transport gas from potential new discoveries in the promising northern region, he said.

Hydro has previously said Ormen Lange aims to start with output of 30 million cubic metres of gas per day, rising to 50 mcm in the second year of production and 70 mcm in the third.

“From now until the inaugural ceremony on October 6, we will be testing production. This may result in fluctuating volumes of gas flowing from the field,” Roetjer said.

Hydro said exports would be “moderate” at first and increase over the autumn. The field is expected to reach 20 billion cubic metres per year production in late 2009 or early 2010.

Ormen Lange becomes the second-biggest gas field offshore Norway after Statoil-operated Troll, with recoverable reserves of 397 billion standard cubic metres of gas.

The project, delivered on time and budget, includes remotely controlled wells on the Norwegian Sea floor, an onshore gas processing plant at Nyhamna on Norway’s coast and the 1,200 km (746 mile) Langeled pipeline.

It has been a showpiece of Norwegian engineering and project management skills, tapping gas from seabed wells at depths of 800-1,100 metres below the waves.

Anti-freeze is added to prevent the gas from thickening in icy temperatures on the way to Nyhamna, a treacherous 120 km journey that includes an incline over the site of the world’s biggest undersea landslide, more than 8,000 years ago.

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