Europe Energy Review

Increased oil and gas investments and production starts in Norway, the UK’s latest clean energy auction, and a number of renewable energy projects featured in the European energy sector in the past month.

Oil & Gas

Investments in Norway’s oil and gas industry are expected to reach a record-high of around 225 billion Norwegian crowns (US$21 billion) this year, as several key projects have been approved in recent years, driven by the country’s temporary tax regime, Rystad Energy said in a new report.

Norway’s oil and gas production has declined by nearly 15 percent from its 2004 peak of 4.6 million barrels of oil equivalent per day (boepd), but output is set to rise again in the near to medium term, the independent energy research firm said.

Norway’s oil and gas production might rise towards peak levels by 2025 thanks to increased focus on gas production and new projects. These volumes will be produced with one of the world’s lowest CO2 footprints and reduce Europe’s dependency on Russian fossil fuels, according to Rystad Energy.

Investment levels in the UK have not recovered as they did in Norway, but if the three largest projects – Rosebank, Cambo, and Clair Phase 3 – get final approvals, 2024 could mark the highest sanctioning activity since 2013, with around £9.5 billion (US$12 billion) in future investments, says Sonya Boodoo, senior upstream analyst at Rystad Energy.

Norway’s Ministry of Petroleum and Energy has received applications from 25 companies for the annual APA 2023 licencing round for awards in predefined areas for the best-known exploration areas on the Norwegian shelf.

Equinor, Aker BP, and the Norwegian units of Shell, TotalEnergies, ConocoPhillips, Repsol, and Wintershall Dea, among others, have bid for acreage in this year’s licencing round, the ministry said.

Norway targets to award the production licences in early 2024.

“Without exploration and new discoveries, we will neither be able to maintain the production of oil and gas over time or further develop the petroleum sector and all the jobs in the industry,” Petroleum and Energy Minister Terje Aasland said.

Also in Norway, Equinor and its partners started production from the Statfjord Øst project at the end of August, expecting to increase production by 26 million barrels of oil equivalents.

Two new wells have been drilled from existing subsea templates, and three additional wells will be drilled. Statfjord Øst is tied to the Statfjord C platform, and the project includes a modification on Statfjord C and laying of a new pipeline for gas lift to the subsea wells.  

“This proves the importance of extending the life of mature fields and maximizing value creation from existing infrastructure on the Norwegian continental shelf (NCS). The project contributes to extending the life of Statfjord C to 2040,” said Camilla Salthe, Equinor’s senior vice president for Field Life eXtension (FLX).

Low-Carbon Energy

While a record number of renewables projects were awarded government funding in the latest UK Contracts for Difference (CfD) scheme, offshore wind projects did not feature in this year’s allocation.

“While offshore and floating offshore wind do not feature in this year’s allocation, this is in line with similar results in countries including Germany and Spain, as a result of the global rise in inflation and the impact on supply chains which presented challenges for projects participating in this round,” the UK government said.

The industry, however, warned that not a single offshore wind award should serve as a ‘wake-up’ call to the government to restore investor confidence.

After failing to secure any new offshore wind capacity in the latest CfD auction, the UK government has to fix the investment framework through a package of reforms to the scheme, support for supply chains and fiscal measures to attract clean energy investment into the UK in the face of global competition, industry body RenewableUK said.

Offshore wind projects did not bid into the auction as a result of the maximum price being set too low, the association noted.

“Industry has previously warned that prices needed to rise to reflect the impacts of the invasion of Ukraine, inflation in key commodities like steel, and increased financing costs from spiralling interest rates. However, offshore wind developers saw the maximum price they could bid in this year’s auction cut by £2 to £44 per megawatt hour (MWh),” RenewableUK said.

RenewableUK’s Executive Director for Policy and Engagement, Ana Musat, commented,

“Offshore wind remains the UK’s cheapest option for large-scale power, so slowing deployment will cost more and leave consumers exposed to volatile global gas markets for longer.”

The leading offshore industry body OEUK also said that the wind auction was a “clear indicator” the system needs urgent help.

“To deliver the UK’s ambitious wind targets, a policy reform must take place, and we will seek to work with government to revise the investment mechanism, implement proper pricing for generators and reduce the costs of doing business in the North Sea,” OEUK sustainability and policy director Mike Tholen said.

Stephen Wheeler, Managing Director of SSE Renewables, commented,

“While it’s good news lots of new Scottish onshore wind cleared, the fact that no offshore wind projects were bid into this auction round clearly demonstrates the challenges our industry is facing right now from significant headwinds caused by inflationary pressure, commodity price volatility, interest rate raises and global competition.”

Søren Lassen, Head of Offshore Wind Research at Wood Mackenzie, noted that the results of the auction, while not unexpected for offshore wind projects, raised questions about the future of renewable energy in the UK.

“While the current scenario is less than ideal, it may serve as the catalyst the sector needs to recalibrate and move toward a more sustainable future,” Lassen said.

The government should consider raising ceiling prices, streamlining permitting, and introducing non-price criteria, according to WoodMac.

New research by the Net Zero Technology Centre (NZTC) has demonstrated that investment in a purpose-built marine pipeline, the Hydrogen Backbone link, to transport hydrogen from Scotland to Europe could be the key to enabling Scotland to achieve its ambitious green export targets by 2045.

The project, which received funding from the Scottish Government’s Energy Transition Fund (ETF) and match funding from industry, examined the repurposing of existing oil and gas infrastructure before determining that a new purpose-built marine pipeline link to Europe is the optimal route to market for Scotland’s green hydrogen.

The pipeline could enable Scotland to meet up to 10 percent of Europe’s projected hydrogen import demand by the mid-2030s, the report found.

The project has received support from funding partners including Shetland Island Council, EnQuest, Kellas Midstream, Crown Estate Scotland and Shell, contributing members Xodus, DNV-GL, Wood, Wood Mackenzie, and Worley, and strategic partners National Grid and SGN.

The UK target to capture and store 20 – 30 million tonnes per annum (Mtpa) of CO2 by 2030 looks very challenging as some companies are not able to progress projects due to a slowdown in the negotiations for government funding, Wood Mackenzie says, warning that urgent government and private investment would be essential to make a promising policy a success.

To meet its 2030 carbon capture, utilisation and storage (CCUS) targets, the UK must accelerate funding processes and private investment must flow quickly afterwards, while companies must execute transport and storage projects within a compressed schedule, Mhairidh Evans, Head of CCUS Research at Wood Mackenzie, said at Offshore Europe in Aberdeen in early September.

In company news, Equinorofficially opened at the end of August the Hywind Tampen wind farm, the world’s largest floating offshore wind farm off Norway.

Hywind Tampen consists of 11 wind turbines based on the floating Hywind concept, developed by Equinor. Hywind Tampen has a system capacity of 88 MW and is expected to cover about 35 percent of the annual need for electricity on the five oil and gas platforms Snorre A and B and Gullfaks A, B and C. Gullfaks and Snorre are the first oil and gas fields in the world to receive power from offshore wind, reducing CO2 emissions, Equinor said.

The Norwegian major also expanded its renewables portfolio in Poland by acquiring a 26-MW onshore wind farm from the Helios Group.

Aker Solutions Subsea and wave energy specialists Mocean Energy have agreed to explore low-carbon solutions that increase the lifetime of brownfield energy infrastructure by using locally generated ocean power to tie-back stranded reservoirs.  

The two companies will combine their expertise in wave energy conversion and subsea integrated solutions to develop a reliable, cost-effective means of powering subsea infrastructure. The agreement could culminate in the development of a pilot project in UK waters within two years, Aker Solutions Subsea and Mocean Energy said.

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