Rystad Energy cost analysis of moving Arctic natural gas
....MOREA Rystad Energy cost analysis of the Norwegian pipeline operator Gassco’s proposed options to export the country’s Arctic natural gas resources, shows that the expansion of Norway’s pipeline infrastructure is a more viable solution compared to boosting the capacity of the existing LNG plant. However, at least 40 billion m3 of additional resources from new discoveries would be needed in order to justify such an initiative.At present, the Hammerfest LNG terminal only has 7.4 billion m3/y of LNG export capacity, and this limit is expected to be reached in 2026 as gas production in the region will exceed export capacity. The terminal was built to accommodate the gas discoveries of the 1980s, but since then new discoveries have added up. Rystad Energy estimates the remaining discovered natural gas resources in the Barents Sea at approximately 90 billion m3.
If Norway’s gas resources in the Barents are to be further developed and exploited, there are two main options to reach markets: either build a major new gas pipeline as a link to existing infrastructure in the Norwegian Sea or increase LNG capacity at Hammerfest. If export capacity limits are not increased, projects will have to be phased so as to fill pipeline capacity as it becomes available, destroying substantial value.
“The cards appear to be increasingly stacked against further development of LNG. High project costs, technically complex solutions and harsh environment conditions don’t make for happy bedfellows even when the opportunity is great. When the economics are more marginal, the simpler pipeline solution is most likely the right one,” says Dane Inglis, analyst at Rystad Energy.
The pipeline option
One strategy put forward by Gassco considers installing an additional 1000 km to the existing Aasgard pipeline and another 830 km pipeline to the Polarled transmission system. These export lines would raise total export capacity to at least 10 billion m3 and potentially as much as 20 billion m3/y. If we consider only currently discovered resources unconstrained, production would only reach approximately 9 billion m3/y throughout the late 2020s and early 2030s. In order to be economically viable, these pipelines would require a gas resource base of approximately 130 billion m3, thereby implying 40 billion m3 in new resources that would need to be discovered over the next five years....
And from OilPrice:
Suppliers Fight For Dominance In This Crucial Gas Market
Europe’s Mediterranean region is emerging as Europe’s main front of commercial rivalry – natural gas producers that rely on pipeline supplies and utilize primarily oil-indexed or hybrid-pricing terms are taking on LNG exporters, tallying unprecedented numbers throughout the first half of 2020 as LNG prices in Europe remain so low that many gas producers are marketing their volumes to their financial detriment. We have looked into the energy choices of Greece, yet the rivalry taking place in Turkey seems even more grand-scale – the Turkish natural gas market is supplied by two Russian conduits, two pipelines from Azerbaijan including the newly-built TANAP, a pipeline from Iran, not to forget the ever-increasing number of LNG cargoes feeding its economy.
Substantial amounts of cheap LNG have blown up the Turkish gas market – in the case of Iran, the sentence might even be read literally to a certain extent. Flows through the Iran-Turkey gas pipeline (throughput capacity of 14 BCm per year) were halted March 31 after a sabotage attack on Turkish territory (a mile from the Iranian border) which Ankara has blamed on PKK insurgents. There was at least a dozen of such instances in past years and usually the repair works rarely go beyond several weeks – this time Turkey’s national gas company BOTAS seems to be stalling maintenance on the back of said LNG abundance. Iran’s national gas company has signaled that gas flows would be restarted by July 21, however this was not corroborated in any way by the Turkish side.
Graph 1. Turkey’s LNG Imports in 2017-2020 (million tons of LNG).
Source: Thomson Reuters.
All the while Turkey’s gas imports from Iran will decrease palpably this year from their 2019 level of 7.5 BCm, gas trade with Azerbaijan seems to be suffering much less than with any other pipeline partner. In fact, in Q1 2020 Azerbaijani pipeline exports to Turkey have gone up 20% year-on-year to 2.73 BCm, indicating yet another year of growth on the back of increasing Shah Deniz volumes. With this, Azerbaijan has consolidated its position as the leading gas supplier to Turkey, accounting for 23% of its gas needs, a status long held by Russia. This is all the more noteworthy as landed LNG prices to Turkey remain firmly below $2 per MMbtu for the third month in a row (having ended 2019 at $5.50 per MMbtu which was back in late last year considered to be really cheap)........MORE
