1. This report has been produced by Elite Sections for distribution with OIL & GAS JOURNAL
www.elitesections.com
The Future
of Gas

2. A
nyone wondering why global
demand for natural gas is
growing at such a rapid rate –
by 60% from 2010 to 2030, according to
Shell – need only step out into the streets
of a large city in an emerging economy,
such as Beijing, Mumbai or Bangkok, and
breathe in the air for the most obvious
answer to their question.
Urban pollution in the developing
world has now reached crisis levels. But by
replacing power plants that use coal and
oil with plants that use natural gas, the
cleanest-burning fossil fuel, policymakers
can reduce the emissions of the particles
and the nitrogen and sulfur oxides that
have become the bane of big city life.
“The global outlook for gas is positive
as gas is increasingly regarded as one of the
solutions to meet global energy challenges,
Norway’s Minister of Petroleum and
Energy Tord Lien explains. “Gas is the
cleanest of the fossil fuels and a necessary
partner for intermittent renewable power
generation. Norway’s explicit goal is to be
a secure supplier of natural gas to Europe
for many years to come.”
“We must promote a common energy
policy serving our joint policy objectives:
competitiveness, sustainability and
security of supply,” Günther H. Oettinger,
European Commissioner for Energy says.
“Diversifying our gas supply will benefit
citizens and businesses across the EU.” In
January, Oettinger proposed reforms to the
Emissions Trading System in Europe that
will increase the price of carbon and help
gas compete better with coal. This will help
eliminate one unintended consequence of
the US shale gas revolution; the export
of excess coal at rock bottom prices to
Europe, challenging the position of gas
in the European power market. “There is
currently a flaw in the market,” says Remi
Eriksen, Executive Vice President & COO
of DNV GL, which is a member of the
IGU and a leading technical advisor to the
global oil and gas industry. “The true cost
of burning hydrocarbons is not reflected in
the price, and in Europe coal has replaced
both gas and renewables in the last year,
which is obviously not the ideal situation.
Policymakers understand that they have to
incentivize the use of gas in Europe, so the
true cost of burning hydrocarbons needs
to be incorporated in the price.”
Following the merger between DNV
and GL in 2013, DNV GL now covers all
stages of the gas industry: upstream, pipe-
lines, regasification, distri-
bution and consumption.
“The merger adds capacity
and competence especially
at the downstream end
of the gas value chain,”
Eriksen says. “We now
address the full value chain.”
Strong global demand
for gas is now driving the
rapid development of the
innovationsneededtoproducenewsupplies.
DNV GL has launched a recommended
practice for the entire life cycle of shale
gas extraction, based on risk management
principles, industry best practices and
standards. At the end
of 2013, it initiated a
Joint Industry Project
to develop international
standards and guidelines
for fields of so-called
sour gas, which is toxic,
highly corrosive and
explosive.
The industry is also
developing new and
more cost-efficient forms of bring-
ing gas to market, such as Floating
Storage and Regasification Units (FSRU).
Sveinung J.S. Støhle, President and
Chief Executive Officer at Höegh LNG,
which is in the vanguard of the devel-
opment of FSRUs, says the company
is seeing strong interest from power
companies in emerging markets in South
America and Asia.
“Instead of spending $1.5 to $2 billion
and taking six or seven years to build a
land-based regasification facility, we can
deliver a solution in two and a half years
that will cost significantly less,” Støhle
says. “Our customers can import LNG in
a much shorter period of time and at a
much more competitive price, which is
why the market has embraced it as the
best solution.”
SAFER, SMARTER, GREENER
FOR JAMES, SAFETY
DOESN’T HAPPEN BY
ACCIDENT.
One part of the bigger picture.
Safety matters. Especially when you’re developing the
regulatory framework for a country’s entire oil and
gas industry. James Brown and his team at DNV GL
are working closely with the authorities in Brunei to
establish robust regulations that meet complex
challenges. Our expertise covers the entire oil and
gas value chain, drawing upon deep international
experience and local expertise to provide technical
advice that makes a real difference. We take a
broader view on the sector and work relentlessly
to ensure that every part we play impacts upon the
bigger picture. DNV and GL Noble Denton have
joined forces to become the leading technical
advisor to the oil and gas industry. As DNV GL, we
help companies become safer, smarter and greener.
Among our 16,000 employees, 5,500 experts are
dedicated to solving complex safety, reliability and
performance challenges in oil and gas projects and
operations.
Discover the broader view at dnvgl.com
“Policymakers
understand that they
have to incentivize
the use of gas in
Europe”
Mr. REMI ERIKSEN
Executive Vice President
& COO at DNV GL
Cleaner fuel and reliable, low cost energy supplies are driving
the global demand for gas
The global fuel of choice “Our customers can
import LNG in a much
shorter period of time
and at a much more
competitive price”
Mr. SVEINUNG STØHLE
Chief Executive Officer
at HÖEGH LNG
“Diversifying our
gas supply will
benefit citizens and
businesses across
the EU.
Mr. GÜNTHER OETTINGER
European Commissioner
for Energy
“Most Asian poli-
cymakers see gas
as one of the most
cost-effective ways to
improve air quality.”
Mr. TORSTEIN INDREBØ
Secretary General of
the IGU
with its environmental
benefits and long-term
availability,” says Torstein
Indrebø, Secretary Gen-
eral of the International
Gas Union (IGU). “There
is an urgent need to con-
trol smog levels in cities,
which are causing serious
health problems. Most
Asian policymakers see gas as one of the
most cost-effective ways to improve air
quality.”
As well as being cleaner burning, gas has
lower carbon dioxide content than other
fossil fuels, helping countries reduce their
greenhouse gas emissions. Meanwhile,
unlike renewable energy,
gas can also produce
power both cheaply and
reliably, with no need
for constant sunshine,
wind or government
subsidies.
As well as assuming
an increasing role
in Asia, gas is also a
central component of
the European energy strategy. “Europe is
highly concerned about climate change
and the security of energy supply,”
Four Floating Storage and
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Gas production from the Norwegian Continental Shelf can supply European industry
with reliable, cost-efficient energy with as little impact on the environment as possible.
Norwegian gas is available today, and for decades to come.
EUROPEAN INDUSTRY
Powered by Norwegian gas
G
lobal gas markets are poised
not only for a rapid increase in
demand but also for a surge in
supply, as international oil companies
and their state-owned partners race
to develop new discoveries, from the
southern waters of the Indian Ocean to
the frozen depths of the Arctic.
Thanks partly to recent successes
in exploration, the Intl. Energy Agency
currently estimates that conventional
and unconventional recoverable gas
resources can supply over 250 years
of the world’s gas demand, at today’s
rate of consumption. Furthermore, the
worldwide adoption of LNG technology
means that operators are now able to ship
these new volumes of gas to wherever the
demand is greatest.
“Development of a global LNG market
gives interesting strategic and marketing
perspectives for us as a producer,” says
Rune Bjørnson, Senior Vice President
of natural gas at Statoil, which in 2013
made more oil and gas discoveries than
any other company. “We naturally tend to
take the gas to the market where it has
the highest premium.”
To take advantage of this globalization of
the gas market, Statoil has been pioneering
a new shipping route, last summer sending
gas from its Snøhvit LNG plant in northern
Norway to Japan via the Northern Sea Route
above the coast of Russia.
“This gives us more
options and more
flexibility in our LNG
marketing,” Bjørnson
says. At the same time,
Statoil has invested
heavily in pipelines to
customers in Europe,
and was one of the first
gas suppliers to sever
the link with the oil price.
As well as investing in shipping
capacity and opening up new trade
routes for gas, operators are also jostling
for position in upstream developments,
often in regions which were barely on the
radar of international oil companies just
a decade ago.
Statoil itself is now weighing up its
development options for Tanzania, where
in the last two years the company has
made a series of major gas discoveries.
Statoil estimates that there could be up
to 20 trillion cubic feet of natural gas in
Tanzania’s Block 2, an offshore license
that it is exploring in partnership with
ExxonMobil.
Tanzania is just one of a series of
gas discoveries off the coast of Eastern
Africa that have turned the region into
one of the most promising hydrocarbon
provinces in the world. In Mozambique
alone, Eni and Anadarko have discovered
around 65 trillion cubic feet of estimated
recoverable natural gas; from 2018 the
country could become the world’s third
largest exporter to LNG and it’s not only
in the developing world that new gas
provinces are being opened up. In Europe,
Statoil is spearheading the development
of gas resources above the Arctic Circle,
perhaps the last remaining frontier for
oil and gas exploration. In 2013, the
Norwegian government approved Statoil’s
development plans for the Aasta Hansteen
field, including a 480 kilometer pipeline
that will incorporate spare capacity for
other discoveries in Norway’s northern
seas. “We are continuing to develop both
fields and infrastructure to remain a
reliable supplier of gas,” Bjørnson says.
Perhaps the most dramatic spike in
global gas availability is set to come from
not from remote regions of Africa and
the Arctic, but from the US itself. Last
year Statoil, which has a major presence
in the Marcellus shale gas area, began
transporting shale gas by pipeline to
Manhattan, putting it in the vanguard
of a trend that is set to transform the US
into one of the world’s largest exporters of
natural gas and change the face of today’s
gas market.
From Africa to the Arctic, Statoil is leading the hunt for new gas
resources to bring to market
New frontiers for exploration
Drilling ship “Discoverer Americas” in Tanzania
“Development of a
global LNG market
gives interesting
strategic and marketing
perspectives for us as
a producer,”
Mr. RUNE BJØRNSON
Senior Vice President of
natural gas at STATOIL
PaulJoynson-Hicks-AP-Statoil
Kharyaga field in Russia
SveinAreEnes-Statoil

4. A
s Asian policymakers turn to
natural gas to meet the energy
demands of their growing middle
classes and to tackle the urban pollution
crisis, energy companies are investing
billions of dollars in new LNG production
facilities and infrastructure. These
investments are poised to take the world’s
gas supplies to the fast growing Asian
markets where they are most needed,
and to make gas even cheaper and more
competitive in the region.
“New supply capacity to the Asian
market from the Caspian region and Russia,
and increased LNG supplies from Australia
and Qatar, combined with more domestic
supplies in Asia, will enhance competition
and most likely bring the Asian gas price
level closer to that of other regions,” IGU
Secretary General Torstein Indrebø says.
“There will be a lot of new gas supply
coming onstream, meaning that the
current $18 per million btu level that we
are seeing in Asia will likely come down,”
Remi Eriksen at DNV GL says. “Australia is
developing a range of LNG projects, and in
8 to 10 years there will also be gas coming
out of Mozambique and Tanzania.”
As well as new
developments in Africa
and Australia, one of
the largest sources of
LNG supply to Asia is
expected to be the US,
which before its shale gas
discoveries was investing
heavily in regasification
terminals and pipelines
toreceiveLNGfromAsiansupplierssuchas
Qatar, the world’s largest exporter of LNG.
Many of these terminals in the US are
now being re-engineered to become
export terminals for LNG leaving the
continent. New LNG export facilities are
also being planned along the Pacific coast,
including Alaska and Canada, providing
easy access to Asian markets for North
American gas. Over the course of the
last year, the US Department of Energy
authorized three terminals to export LNG
to countries with which the US does not
have a free trade agreement. Observers
say that even after adding the costs of
liquefaction and shipping, the arrival of
this new supply of gas on the Asian market
should force regional gas prices lower.
As well as reducing the region’s gas price,
exports from the US will also add to Asia’s
security of supply. “Having LNG from the
US creates a level of confidence for key
decision makers that gas is available,” says
Rune Bjørnson at Statoil.
Thanks to shale gas, the US has now
overtaken Russia to become the world’s
largest producer of natural gas. However,
Russia itself is also moving to build a
position as a major exporter of gas to Asia,
both by pipeline and as LNG. At the end
of 2013, Russia ended the monopoly that
state-owned Gazprom used to enjoy on
LNG exports, opening the way for smaller
producers such as Rosneft and Novatek to
enter the export market. Whereas Russia
has traditionally exported its gas to Europe,
Las Raffan in Qatar
Gazprom and independent producers are
now looking eastwards to Asia’s faster
growing markets. For much of the last
decade, Gazprom has been in negotiations
with China National Petroleum Corp
(CNPC) to pipe gas from new fields in
eastern Siberia to the fast growing Chinese
market, which so far has depended on
LNG and on gas from Turkmenistan.
Gazprom needs to move fast; CNPC has
already reached a deal to partner Novatek
in developing its giant Yamal LNG project
in the Arctic, while Rosneft also has an
agreement with CNPC and is eyeing the
Asian export market eagerly. Asian buyers
stand to be the greatest beneficiaries of
intense competition between Russian gas
producers trying to access their market.
Further south, according to some
forecasts Australia could leapfrog Qatar to
become the world’s largest exporter of LNG
by the end of this decade. In the coming
years, Australia’s export capacity is set for
significant expansion, with an estimated
$200 billion of projects under construction,
including the Chevron-operated Gorgon
project, which carries an estimated price-
tag of $54 billion. In addition to traditional
LNG projects off the west coast of Australia,
the industry is investing in a series of giant
projects in Queensland in eastern Australia
that will convert onshore coal bed methane
(CBM) into LNG and then export it to Asia.
Australia is also the site of perhaps the
gas industry’s most exciting technological
innovation; Floating LNG, pioneered by
Shell. Whereas the costs of developing
Australia’s offshore reserves using onshore
facilities have surged, use of Floating LNG
technology can minimize these costs and
make Australian gas more competitive with
the new gas supplies that are imminent
from the US, Russia and beyond. When
complete, Shell’s Prelude FLNG will be
the largest offshore floating facility ever
built, allowing Shell to produce natural
gas 200 kilometers off the coast of Western
Australia,turnitintoLNGandthentransfer
it directly to the ships that will transport it
to customers. By reducing onshore project
costs and the environmental footprint of
an LNG development, FLNG can open
up opportunities for countries looking to
develop small or remote gas resources that
were previously seen as uneconomic.
At the same time as new sources of
upstream supply are developed, Asian
countries are also investing in new LNG
import terminals. In 2013, Singapore and
Malaysia began importing LNG, while
Vietnam and the Philippines are considering
joining the club and South Korea, Thailand,
China and India are all expanding their
capacity. Sveinung Støhle at Höegh LNG
says the company is also seeing strong
demand from Asia for its Floating Storage
and Regasification Units (FSRUs).
“The main driver of the Asian market is
to import gas to produce electricity. These
economies are growing by 5% to 7% per
year and they need to keep up with LNG
production,” Støhle says. “More than half
of the projects in the pipeline are in Asia,
as by using an FSRU they will save time
and money.”
New sources of Liquefied Natural Gas are set to transform the
Asian energy market
As well as importing
increasing volumes of LNG,
Asia is exploring its own
unconventional gas reserves
Asia prepares for surge in LNG supply
New supplies of international gas are
not the only source of supply for Asia’s
increasing gas demand; countries across
the region are also beginning to explore
their own potentially giant reserves of
unconventional gas.
While the current focus of the gas market
is on the impact of shale gas from the US,
countries such as China are now eyeing
up the potential of Asian shale gas.
“The big global impact from unconven-
tional gas will really take off if China and
other large energy consuming countries
succeed in their efforts to produce shale
gas,” IGU Secretary General Torstein
Indrebø says. “Estimates indicate
that China has shale gas reserves at
the same level as North America.”
Royal Dutch Shell is leading the way
Shale gas and
hydrates the key to
long-term security
in exploring China’s unconventional gas
reserves, spending around $1 billion a year
in the country’s upstream. “The enormous
increase in gas demand is driving Chinese
authorities to plan growth on all fronts in
parallel: increasing domestic production,
increasing pipeline and LNG imports,”
Shell’s upstream international director
Andrew Brown said last year. “This diversity
of gas supplies increases the robustness
of supply security in China and results in
a higher share of gas in the energy mix.”
In the longer term, the potential of methane
hydrates in Asia could dwarf the promise
even of shale gas. In 2013, Japan,
which is almost entirely dependent on
energy imports, recorded a world-first,
successfully extracting natural gas from a
giant offshore reserve of frozen methane
hydrates. “Japan is taking the lead on
hydrates at the moment,” says Remi
EriksenatDNVGL.“Thisisanareawhere
we are going to increase our knowledge
and identify technology gaps to see where
DNV GL can contribute to develop these
new required technologies.”
Höegh LNG vessel GDF Suez Neptune
“The Northern Sea
Route gives our LNG
strategy more options
and more flexibility”
Mr. TORD LIEN
Norwegian Minister of
Petroleum and Energy
HaraldPettersen-Statoil

5. SJUR E. BRATLAND, Managing Director INTSOK BRIAN BJORDAL, Chief Executive Officer GASSCO
FRANK ELLINGSEN
Managing Director
Technology Centre Mongstad
EINAR STEENSNAES, Chairman of the Board
GASSNOVA SF
SVENN IVAR FURE, Strategy and Business
Development AKER SUBSEA AS SVP
PÅL HELSING, Executive Vice President
KONGSBERG Oil and Gas
Technologies
Q: What would you as INTSOK like to see from the new
government to support growth internationally?
A: First of all, I would like to see stability and long-term
prospects. That is the main point and primary interest for the
whole industry.
Q: In the gas sector, what are now the main markets?
A: Of course, everyone is looking at the latest gas discoveries.
We have a delegation coming back from Tanzania and
Mozambique and there are great hopes in these areas. We
are going to try to use our stability, experience and reliable
technology as a way to promote ourselves outside. Part of the
globalization we have seen shows that it is not good enough
to say, “I’m from Norway and we had success in the North
Sea.” We have to adapt to the local markets, aand that is what
we are doing.
Q: What are current challenges for INTSOK and for the
sector?
A: We need to put the best available technology to work
and we need to have better recovery rates. We have been
able to cope with the
challenges faced before and
globalization is actually
a good thing because it
promotes competition. I
think INTSOK will have
a very important role in
the future to help regional business learn, listen and adapt.
In that sense, I am optimistic for the Norwegian industry.
As long as we have continued support from the government,
our task is to survive in the short-term for that role and
INTSOK is even more important now than it has been,
even if the Norwegian market will be the largest offshore
market in the next four years as we are helping the industry
understand the common challenges. Also, I would like to
mention our high tax rate, but also to remember that we have
a very flat salary structure in Norway so our R&D people are
known to be very cost-efficient. When you have innovative
and creative people you always have a bright future.
Q: Can you give us a quick overview of how Gassco has
contributed to the Norwegian gas success story?
A: I think Norway has always been very conscious of
being slightly ahead of things. The startup of Gassco was
one of many examples of how we adapted to the future
and this is important. It is not being the strongest or most
intelligent that helps one survive, it is the ability to adapt
to a changing world. We have not had any very serious
incidents and we have managed supply reliability. We
have not been headline news, and that is something that
pleases me. This is an indicator of success; as it is all about
reputation. Norway has a very reliable reputation and with
our excellent history, we have been able to build upon
these strengths and therefore to grow over these 12 years.
Q: Are you concerned that the low gas prices are going
to delay investments and projects in gas infrastructure?
A: Obviously, it could. We have seen that before. We saw
it during the financial crisis. There are many aspects that
we cannot control but I am not too concerned at this
point, but it is true that
the low gas prices could
cause financial trouble or
create a cost issue. Also,
the cost in Norway is
relatively high and to
maintain the competiti-
veness of Norwegian gas is always an issue in my opinion.
We always have to consider this and make judgments in
order to adapt. Norwegian gas exports in any event
represent a substantial contribution to energy supplies in
major European countries, and remain stable.
Q: What drives you to get up in the morning?
A: Deep down I am driven by other people; they really
inspire me. I am privileged because I work with people in
Gassco and so many others in other companies that have
enormously interesting backgrounds. I enjoy this and the
challenges that we share. I like working with others and
that is what keeps me going.
Q: What are the major
lessons that you have
learnt from the full-scale
carbon capture project?
A: The importance of
testing related to decision
making. Decision makers
such as CEOs, if they
wish to put the CCS into
effect correctly, need to
understand what are the acceptable risks related to any
decision that they make thoughout the entire process.
In our first year of operation we have influenced three
main areas. One of these risk areas is environmental. The
second is technology and the third area is the financial
risk; financial because we have been looking at the
planning and engineering element of the CCS, as well
as the construction and start-up through to operation.
The overall reduction of these risks may well be the most
important thing that we have done here.
Q: What are the main
achievements of the CLIMIT
Program and what are the
main priorities?
A: The Research Council of
Norway and Gassnova share
responsibility for this successful
program. We take care of the
testing and demonstration
projects and the Council takes care of the research.
I think a lot of experience and results that contribute to the
well-functioning, cost effective CCS technology have been
supported by CLIMIT and this has really added value to its
development. We spend about $31.7 million per year on
that program and by taking into account what has been
achieved we hope CLIMIT will continue its contribution at
the current level. We consider the CLIMIT Program along
with TCM as two very important components that have
contributed to the successful commercial development of
CCS technology.
Q: Why do you think
Norway has become a
leader in technology, re-
search and development?
A: One example can be
seen from our company
which is investing a lot in
subsea technology. We have
had tremendous growth in
this area, and our subsea
revenue has more or less doubled since 2010. Also, most of
the new projects that we are selling now contain some new
technology and this is what makes a company relevant in
the world today. There is a quest in the industry to increase
uptime, recovery and make products more installation-
friendly with lower costs. Aker Solutions excels at this
as operators look at more challenging environments.
There are some very clear benefits to being leaders in
subsea. When you are being evaluated, you can provide
more functionality and value to customers.
Q: Exploration and produc-
tion spending is increasing
globally, how do you work
with upstream clients to
develop new technology?
A: Kongsberg works
to develop technology
across a number of areas.
We try to get the end
users involved in all our
development programs and we are currently carrying
out a major operation with BP that is an initiative to
reduce unproductive drilling time. This has been a
three year iniciative aimed at integrating analysis and
data with our own operator’s experience.
The aim is to provide the right information at the right
place and at the right time. This is an effective decision
support tool and the good news is that we have some
pilot programs that have already shown some very
good results.
INTSOK, Strategic role will continue A reliable and strong reputation
TCM, A carbon capture leader Added value for the continued
development of CCS
Technology makes
companies relevant
Innovation in decision making
Paving the way for global gas innovation