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The future of the LNG plant at Melkøya

12 April 2023 12:03 (CEST)

People & perspectives
Energy transition & net zero
Our energy solutions

Op-ed by Trond Bokn, head of project development in Equinor, first published 12 April, 2023.

More power is a necessity to secure gas production at Melkøya past 2030. Moreover, electrification of the plant is one of the most extensive climate measures in Norway, reducing CO₂ emissions by 850,000 tonnes per year.

The partnership thoroughly assessed alternatives to electrification before submitting the development plan to the authorities in December last year.

“Snøhvit Future” is the largest industrial project in Northern Norway, with ambitions including continued activity and value creation towards 2050. The project cuts emissions and contributes to energy security in Europe. The Snøhvit partners have worked for more than nine years on studies, analyses and project development prior to submitting the development plan to the authorities.

In August 2023, the Norwegian government gave the go-ahead for the project.

Trond Bokn
Head of project development in Equinor

Electrification, carbon capture and storage (CCS), as well as partial electrification with CCS are the concepts that were evaluated. The objective has been to secure more power to operate onshore compression which can maintain production from Snøhvit past 2030, while simultaneously cutting greenhouse gas emissions in a manner that is cost-effective. Following thorough evaluations, the partnership made a decision in 2019 to choose electrification as the power solution for Snøhvit Future.

The assessment is that electrification can yield the greatest emission reductions on Melkøya, it is the most cost-effective solution and carries the lowest project implementation risk compared with the other concepts. The decision is based on 15 years of experience operating the Snøhvit field, up-to-date data about the plant on Melkøya and the partnership’s overall expertise within project implementation and CCS.

An artist's impression of the Snøhvit Future facility. Illustration: Equinor

CCS is important for Equinor, but is complicated at Melkøya

CCS is an important technology for the energy transition and is also a priority commitment area for Equinor. We have extensive experience with CCS and are involved in several of the major projects aimed at further developing this technology, e.g. through Northern Lights.

The debate on “Snøhvit Future” has led to requests for more information about how we have estimated and calculated costs. Our experience with development and operation of Melkøya since 2007 shows that the LNG plant is a complex and challenging facility, which makes modifications extremely demanding. The reason that CCS on Melkøya would have been so expensive was not the CO₂ capture itself, but rather the integration of the capture unit for the LNG plant.

Integration of a CCS plant with new equipment would have entailed a significant scope of work, require expansion of areas on Melkøya as well as a 170-day shutdown of the plant, and deferred gas export. Our assessment also found there would have been a need for a new CO₂ pipeline, well and probably also a new CO₂ reservoir for storage.

Electrification of platforms

New figures indicate that a development solution including CCS would have had an investment estimate of 37 billion kroner, nearly three times more than the project submitted to the authorities. In this scenario, the CO₂ capture plant would account for around 30% of the cost, plant integration including onshore compression would have accounted for 53%, with costs for CO₂ transport and storage making up the remainder.

Cost levels have grown substantially since CCS was rejected in 2019. We have seen a cost increase of more than 30% in comparable projects due to the situation in the supplier market and inflation. Therefore, we expect that an updated assessment of CCS at Melkøya today will entail a development that has become even more expensive.

For these reasons, it would have been both industrially and financially irresponsible for the partnership to recommend a full CCS development based on existing turbines at Melkøya. The risk of delays and cost overruns would have been high, and significant costs would be incurred, thus challenging future profitability for the LNG plant.

Without more power, Norwegian gas exports will fall

The emission cuts debate is an important and major issue, also for Hammerfest LNG. But it is just one part of the larger project. For us, the issue is also securing operation after 2029.

As pressure gradually declines in the gas reservoirs, we will rely on the Snøhvit Future project to secure a sufficient stream of gas to the plant. If not, Norwegian gas exports will fall. This project will secure the future of HLNG. With compression, we can maintain high gas exports even after 2030. Without compression, we cannot guarantee operation after 2030. Onshore compression also needs more power, and a CCS solution would also have required either more gas generators or a new power supply.

Snøhvit Future will secure growth and value creation in the north

Snøhvit Future entails investments of 13 billion kroner to further develop the cornerstone local employer, Hammerfest LNG, toward 2050. Including ripple effects, the plant contributes nearly 900 full-time equivalents in Northern Norway, and around 70% of the value creation in the development phase is expected to go to Norwegian companies.

Snøhvit Future will maintain important gas deliveries to Europe, while at the same time removing significant emissions. The project is financially solid and will help create substantial values and ripple effects for decades to come.

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