Shell to start feeling Norway heat on shelved gas project

Oslo - Norway expects Royal Dutch Shell to go forward with a shelved project to boost recovery of natural gas at the Ormen Lange field and warned it will start pushing the company for progress from next year.

“A clear message to Shell is that we expect that it seizes the opportunities that exist at Ormen Lange and comes to a decision to take this forward,”  Bente Nyland, the head of the Norwegian Petroleum Directorate, said in an interview in Oslo on Wednesday. “There are a lot of resources at Ormen and we have to get them out.”

Norway wants a decision on a so-called offshore compression project, which was postponed in 2014 as one of the first victims of an industrywide drive to cut spending and costs. It will start to be “urgent” to proceed with the project during 2017 and 2018, Nyland said. Production at the Norwegian Sea field, which supplies about 20% of the UK’s gas consumption, has been falling as the pressure in the reservoir drops, according to the NPD.

As oil and gas companies operating in Norway are preparing for a third year of investment cuts, authorities have warned them to not scrap viable projects or put time-critical resources at risk that could be lost because infrastructure disappears or geological conditions change.

Statoil decision

Nyland has previously said Norway doesn’t want companies that “skim the cream.” Authorities have put particular pressure on Statoil ASA and its partners to go forward with a project to increase oil recovery from the Snorre field, and the state-controlled producer announced Thursday it had moved a step closer to a final investment decision.

Shell is expanding its terminal at Nyhamna to allow it to process gas from other fields and is also installing two onshore compressors to boost recovery from Ormen Lange. The company is still working on the offshore compression project and had previously said a concept decision could be made in 2017.

“It is still too early to conclude if a major project to increase recovery beyond onshore compression will materialize,” Kitty Eide, a spokeswoman for Shell, said in an e-mail. “The concepts being evaluated range from de-bottlenecking from existing infrastructure, to subsea separation and compressor solutions subsea as well as on floating structures.”

She declined to comment on timing, volumes or the current assessment of the project’s viability.

Shell said in January it was optimistic and that the project could add as much as 30 billion cubic meters of gas. Remaining reserves are about 140 billion cubic meters, down from 300 billion cubic meters initially. Production has dropped every year from a 2012 peak of 22.2 billion cubic meters, but is on track to rise in 2016, according to figures from the NPD.

Shell is reported to be considering a sale of all or some of its assets in Norway as part of a global $30 billion divestment program. Other major oil companies such as Exxon Mobil Corp. and Total SA are also reconsidering their involvement in the Nordic country, causing concern within the government over which companies could step in.