Norway could provide 20 per cent of UK gas supply in new deal
Norway could provide up to 20% of the UK's future gas demand in a new deal signed this week by UK Energy Minister Mike O'Brien and Norwegian Oil and Energy Minister Thorhild Widvey.The cross-border cooperation treaty comes after two years of negotiation between the two governments and will help secure UK supplies as it becomes a net importer of gas over the next 30 years. The UK reached its peak gas production levels in 2002.
"The new agreement will allow oil and gas companies in both the UK and Norway to develop further cross-boundary oil and gas deals on a much clearer and faster basis," Mr O'Brien said.
The offshore industry has been pressing the UK and Norwegian Governments to set in place the right framework for a range of cross-boundary developments as they believe this would be a key facilitator for increased value creation in the North Sea.
In August 2002 a joint UK/Norway Pilot-Konkraft industry work group published its report 'Unlocking Value Through Working Together'. The report contained a recommendation to Government to negotiate a new framework oil and gas treaty to remove the need to negotiate a time consuming treaty each time a cross-boundary project was in prospect. The aim was to facilitate a genuine free-flow of oil and gas across the breadth of the North Sea and ensure optimal use of existing infrastructure in the North Sea, particularly since many of the areas of the North Sea are now mature provinces. Both Governments endorsed the report. The new framework treaty is one of the UK Government's commitments in its Energy White Paper published in February 2003.
The basic principles of the new treaty have already been applied in two oilfields - Playfair and Boa - both of which had minor extensions onto the other country's continental shelf. In each case regulatory authority was assigned to the country with the biggest resources at stake.
The new treaty will cover all new cross-boundary projects, joint exploitation of reservoirs straddling the border, joint use of infrastructure and future construction and operation of pipelines carrying oil and gas from Norway to the UK.
It is expected to lead to two new cross border projects as early as this summer.
Norway is Western Europe's biggest producer of natural gas and the world's third biggest oil exporter. Just one pipeline, the Langeled pipeline supplying gas from the Ormen Lange field, will supply around a fifth of the gas the UK needs in decades to come.
By David Hopkins