Advokatfirmaet Selmer DA
How to improve the position of gas in the European energy market? Bengt Lie Hansen, Selmer Law Firm
The 10th Russian Petroleum & Gas Congress, 26-27 June 2012, Moscow
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The role of gas in the energy market
• Natural gas accounts for more than 20% of global energy consumption
World consumption
• Oil remains the world’s leading fuel, accounting for 33,1%, but this is the lowest share on record
• Coal increases its market share back to the levels of 1969 (30,3%)
(million tonnes oil equivalent)
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Developments in the global energy market in 2011
Source: BP Statistical Review of World Energy June 2012
Gas is a preferable energy and is winning market shares
3Source: *IEA – The Golden Age of Gas Scenario 2011, **IEA, LEA estimates
Benefits
• Cleanest of the fossil fuels
• Play a key role in helping to meet environmental targets
• Competitive cost of supply
World energy demand by fuel*
Coal40%
Oil5%
Gas21%
Nuclear13%
Hydro17%
Solar/Wind2%
Other2%
20,100 TWh
20,100 TWh
(million tonnes oil equivalent)Global power generation fuel
split in 2009**
• Vast gas resources close to EU
• EU needs to acknowledge the possibilities gas provides
Gas supply to Europe today and in the future
4Source: *Total according to Cedigaz, **Energy Outlook 2030, BP 2012
EU gas map 2010*Trade flows (billion cubic meters)
Sources of gas supply, Europe**(Bcf/d)
Arctic – a key to Europe’s future gas supply
5Source: Norwegian Ministry of Petroleum and Energy
Need to develop efficient fields and transportation routes in the Arctic
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Arctic challenges
• Arctic climate• Ice• Cold / dark
• Sensitive ecosystem
• Lack of infrastructure
• Remote
• HSE
• Arctic cost level (ref. Shtokman)
New gas projects for future supply of gas to Europe from Russia and Norway
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• Arctic pipe (Barents pipe)
• Infrastructure in Russian waters
• Best practise in field development and transportation
• Barents Sea
• Shtokman / Yamal
• Kara Sea
New gas transportation conceptsNew areas
New sources for gas production and exports
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New agreements secure gas production
• Rosneft / ENI, agreements in Barents Sea
• Rosneft / Exxon, agreement in Kara Sea
• Rosneft / Statoil, agreement in Barents Sea
• New Norwegian acreage as a result of treaty Norway / Russia
• 22nd round Norway in 2012
Russia and Norway are producers and large exporters of gas to Europe
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Mutual dependence
Cooperation through technology sharing
Secure confidence in gas supply to Europe
• Explore for more gas and develop the fields to operate more efficiently and under safe conditions
• Arctic cost levels are a challenge to viability• Sub-sea solutions and multi-phase transportation of hydrocarbons vital for reducing costs to make
Arctic production profitable
• Common goal to maximize the net back value of gas for producers
• Two major producers secure confidence in gas supply to Europe
• International partnership agreement envisage cooperation through technology sharing and employee training
Maximize net back value
The position of long term gas sales contracts in Europe
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Source: BBC
Long term gas sales contracts
• Instrumental in developing large gas fields
• Risk / reward relationship balance
• Take or pay
• Price indexed to oil
• New emerging spot market for natural gas in Europe
Challenges
• Spot market “undermines” the long term contracts and creates volatility in gas prices• Buyers with long term contracts have difficulties in
today’s market
• Need to create a platform for reasonable value creation for all parties in the gas value chain
• Gas is not subsidized such as coal and renewables, and can compete favourably without market distortion
Summary
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• Gas has a good future in Europe, despite • Shale gas uncertainty• Need clear signals from the EU to secure
the heavy investments necessary
• Arctic gas is a new source of supply to Europe
• Gas is a preferred fuel in the market, but important to secure• Cost effective gas supplies• Confidence in gas• Security of supply from several sources• Flexibility• Environment• Avoid interruptions• Back-up solutions and cooperation
between producers and buyers *Shtokman gas and condensate field pre-development scheme
Source: *Gazprom about Shtokman
“Let’s explore the Arctic together!”
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Thank you for your attention!OsloAdvokatfirmaet Selmer DAP.O.Box 1324 Vika N-0112 Oslo, NorwayVisiting address: Tjuvholmen allé 1N-0252 Oslo, NorwayTel: +47 23 11 65 00, fax: +47 23 11 65 01
TrondheimAdvokatfirmaet Selmer DAP.O.Box 869N-7409 Trondheim, NorwayVisiting address: Kjøpmannsgata 52N-7010 Trondheim, NorwayTel: +47 73 87 90 60, fax: +47 73 87 90 61
www.selmer.no
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