"Europe needs a well-functioning gas market"

June 7, 2006, 15:00 CEST

"Gas can become an even more important source of electricity production in Europe, if European politicians and authorities continue the work to encourage large investments in intrastructure," commented Jørgen Rostrup, head of Markets in Oil and Energy, during a panel debate on gas power at the World Gas Conference in Amsterdam on Tuesday.

Rostrup said that in the future we will witness a complex scenario with a combination of different forms of energy, and that the best way to safeguard reliability of supply to Europe is by counting on a range of different sources of energy, including gas.

"The European gas market is surrounded by large, gas-rich provinces, which means that it has a favourable location. Ongoing production and new discoveries in Russia, North Africa, the Middle East and Norway provide Europe with good opportunities to import gas from different areas, both within and outside Europe," Rostrup said.

Increasing export
He emphasized that the export of Norwegian gas to Europe will continue to increase in the years to come. Between 2005 and 2010, Norwegian gas exports are expected to increase from 85 billion to 120 billion standard cubic metres (sm3) annually. Rostrup pointed out that this increase reflects Hydro's expected production rates in the years to come.

"Since 2001, we have doubled our gas production, and we expect production to continue to increase dramatically in the years ahead," Rostrup said.

Proud operator
In 2001, Hydro's gas production was around 5 billion cubic metres annually. By 2005, production was just short of 10 billion cubic metres, and expected production for 2010 exceeds 16 billion cubic metres. Much of this expected increase is due to gas production from Ormen Lange, which comes on stream in October 2007.

"We are very proud to be operator in the development phase of the Ormen Lange project. The gas from Ormen Lange will be transported 1200 kilometres, through the world's longest subsea gas pipeline, and will supply Britain with 20 per cent of its gas needs, that is to say, over 20 billion cubic metres of gas annually. But we also have sufficient flexibility in the transportation system to send some of the gas to the continent, if we want to," Rostrup commented.

High gas prices
Rostrup participated in the panel debate along with representatives from the Ministry of Finance, (the Netherlands), Centrica (UK), Union Fenosa Gas (Spain), Eurogas (Belgium), RWE (Germany) and Promgaz (Russia).

Several of the speakers pointed to the fact that gas prices are high, claiming that coal and nuclear power are therefore preferable as sources of electricity production.

There was no time to follow up this topic in the ensuing debate, but Rostrup commented afterwards that the high gas prices reflect the huge demand for energy worldwide.

"It is also a problem that gas is taxed heavily in certain European countries, while coal and nuclear power are not taxed. This means that we don't have a level playing field, which contributes to us not being able to fully exploit the environmental advantages that natural gas has over other fossil fuels," Rostrup said.

Many people regard the World Gas Conference as the most important meeting place for actors in the European gas market. Hydro is participating with a large stand in the exhibition area, where the most important elements of the display are a model of Ormen Lange, and a three-dimensional presentation showing the challenges associated with placing subsea installations on the uneven sea floor, at a sea depth of 800 to 1100 metres.