August 31, 2011 / 4:41 PM / 8 years ago

REFILE-UPDATE 2-Norway looks at pipeline to Barents Sea gas fields

(Adds Statoil CEO, Norway foreign minister, other officials)

* Gassco eyes 1,400 km extension of pipeline to Barents Sea

* Extended pipeline would carry Arctic gas to Europe

* “We have to think big” - Norway foreign minister

* Preliminary price tag: $1.9-5.6 billion

By Walter Gibbs

HARSTAD, Norway, Aug 31 (Reuters) - Norway is studying a massive northward extension of its offshore pipeline network to reach potential gas fields in the central Barents Sea, where Norway and Russia agreed on a boundary earlier this year.

“We are looking at the whole Barents Sea area on the Norwegian side,” Kjell Varlo Larsen, spokesman for state-owned Norway pipeline operator Gassco, told Reuters on Wednesday.

“It will be based on (gas) discoveries that are already made but also on the future outlook.”

Gassco’s pipelines supply a fifth of European gas needs. They criss-cross the North Sea and Norwegian Sea but stop about halfway up Norway’s rugged west coast, off Trondheim.

As oil companies look to the Arctic to replace declining fields off southern Norway, Gassco wants to find the best way to extend its trunk line north and then east into the Barents — some 1,400 km.

Norwegian Foreign Minister Jonas Gahr Stoere welcomed the “daring vision” of a pipeline for Arctic gas that industry executives said could cost billions of dollars.

“We have to think big,” he told Reuters on the sidelines of a petroleum conference above the Arctic Circle.

He noted that Norway’s current gas production of some 100 billion cubic metres per year is projected to plunge after 2020 unless large new discoveries — most likely in the Artcic — are brought to market.

“An extension of the pipeline network can stengthen the Norwegian footprint in Europe and prolong our leadership as a predictable supplier of gas,” he said.

He said an offer to transport Russian gas to western Europe through Norwegian pipes “cannot be excluded”, though Russia is investigating its own transport solutions.

Statoil CEO Helge Lund confirmed on Wednesday that Gassco has completed a separate study for a potential pipeline linking the Norwegian oil company’s pioneering Snoehvit field in the Barents to the north end of today’s Aasgaard Transport pipeline some 1,000 km south.

Lund said Statoil is comparing the cost and utility of moving future Snoehvit gas by pipe as an alternative to expanding a plant near Hammerfest that now super freezes the gas into liquefied natural gas (LNG) for ship transport.

He declined to reveal the contents of the Snoehvit study, which will be evaluated over two years, and said piping gas has a disadvantage compared with shipping — price.

“With LNG (ships) you can push the gas to the highest paying market,” he said, noting that world economic growth was increasingly focussed on Asia.

Pipeline proponent Johan Petter Barlindhaug, chairman of North Energy , said industry officials see the cost of a full-fledged Barents pipeline ranging from 10 billion to 30 billion Norwegian crowns ($1.9 billion to $5.6 billion).

He said a pipeline was unlikely to be built whole, but would inch northward as new gas volumes are found.

“We need to find a lot more gas” to justify a full build-out, he said — and predicted that would eventually happen.

“I think we will see the pipeline passing by the North Cape around 2030,” he said, referring to Norway’s northernmost tip.

Bente Nyland, head of the Norwegian Petroleum Directorate, said about 10 more exploration wells will be drilled in the Barents Sea by the end of 2012.

“It’s an all-time high tempo now,” she told Reuters, but declined to say when to expect a licensing round for oil companies to explore the newly delineated zone at the Russian frontier.

Larsen said results from Gassco’s “Norwegian Continental Shelf 2020” pipeline study would be issued this winter.

The study is to include potential new or expanded onshore gas processing facilities in the far north and any upgrades to the southerly matrix needed to prevent bottlenecks.

Gro Braekken, managing director of the Norwegian Oil Industry Association, said an investment to pipe gas from the Norwegian Barents made no sense unless Norway also permits oil and gas activity off the Lofoten archipelago in the more southerly Arctic.

Otherwise, she told Reuters, “the obvious route to market (for Norway’s Barents gas) is through Russia”.

Norway’s government has deferred a formal study of the the environmentally sensitive Lofoten area until at least 2013. (Reporting By Walter Gibbs; Editing by William Hardy)

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