Nick Terdre, Contributing Editor
Arrangements for a new international subsea pipeline in northern Europe are coming together. The Skanled system will transport Norwegian gas to consumers in the south of Norway, Sweden, and Denmark. An investment decision is to be made in 2009, which should lead to startup in 2012.
Skanled will meet an increasing demand for gas in Scandinavia. The signs are that it will also open the way for a new pipeline between Denmark and Poland.
The Skanled pipeline may deliver Norwegian gas to southern Norway, Sweden, and Denmark.
The line likely will be installed in three sections. The first will run 400 km (249 mi) from the Kårstø gas terminal in western Norway, around the south coast and onward to the Grenland industrial region. From Grenland a second leg, about 300 km (186 mi) long, will run to Sweden’s west coast, with several possible landfalls, including Gothenburg. From this section, a spur will branch off to the Jylland region in northern Denmark, a distance of 50-60 km (31-37 mi).
Shipping commitments in mid-year totaled 18 MMcm/d (365.7 MMcf/d) of gas, and the capacity of the line was set at 24 MMcm/d (847.55 MMcf/d). This might make it necessary to increase the diameter, which was originally set at 24 in. (61 cm) for the two main sections and 18 in. (46 cm) for the Denmark spur. Alternatively, compression could be used to achieve the desired capacity.
In April, Gassco, the state-owned operator of most of Norway’s gas transportation system, announced that the NKr 7.7 billion ($1.3 billion) project would be fully funded. Among the most recent participants are German gas giant E.ON Ruhrgas, also a leading player in the Swedish gas market, and Polish Oil and Gas Co. (PGNiG). This brings the number of owners to 10, primarily industrial and utility companies from Norway, Sweden, Denmark, Germany, and Poland.
From an early stage, the partners decided Skanled should carry ethane to serve the needs of the petrochemical industry in Grenland. Therefore, facilities will be required to separate ethane from natural gas. This June, in a meeting with oil and energy minister Odd Roger Enoksen, UK-based chemicals company Ineos declared its intention of taking on full or majority ownership of the separation plant, which will cost an additional NKr 2.2 billion ($345 million). This undertaking is conditional on the completion of two acquisitions agreed by Ineos - Norsk Hydro’s Kerling polymers business and the Borealis petrochemical business in Norway.
Both the Kerling and the Borealis facilities are in Grenland. Skanled is expected to make landfall close to Rafnes in the Frier Fjord, which is the location of an ethylene cracker forming part of the Kerling facilities.
A further nine companies also have signed up to ship gas through Skanled, including Ineos and Statoil. Shippers are now in negotiation with buyers to firm up purchase commitments. These should be concluded, at least in provisional form, by year-end.
Work is also under way to prepare an environmental impact assessment for submission to the governments in Norway, Sweden, and Denmark and to secure other necessary permits from the authorities. By year-end, Gassco expects to award a contract for pre-engineering of the line.
Skanled will be Norway’s eighth gas export trunkline, but the first to be entirely owned by consumers. The others are owned by producing companies belonging to the Gassled partnership. Although Gassco was established to act as a neutral operator for the Gassled infrastructure, Skanled owners likely will ask it to operate the new line also.
PGNiG’s recent decision to join Skanled is connected to its acquisition of Norwegian gas, which, even if only modest, will decrease Poland’s dependence on Russian supplies. The company has agreed to acquire ExxonMobil’s 15% stake in the Skarv field development in the Norwegian Sea, which entitles it to 5.37 bcm (189.6 bcf) of gas. PGNiG also has negotiated a frame agreement for buying gas from Total in Norway.
Skanled will enable PGNiG to transport its gas as far as Denmark. To cover the remaining 230 km (143 mi) to Poland, the company has reached agreement with Danish state company Energinet.dk to work together to implement the BalticPipe link. In its original manifestation, BalticPipe was going to be the transport link for a 2001 gas sales agreement between Poland and Denmark. At that time, Denmark’s representation in the pipeline project was led by Dong. But the project was shelved when the then Polish government went cold on the sales deal. A new government, with a different perspective, is now in office.
BalticPipe, which had planned landfalls at Avedøre on Denmark’s east coast and Niehorcze in Poland, had an estimated cost of €350 million ($470 million). The sales agreement had a volume of 2 bcm (70.6 bcf) a year, but according to Dong, the pipeline would only have been economic with a throughput of 4 bcm (141.26 bcf). Calculating from Skarv’s design capacity of 14 MMcm/d (494 MMcf/d), PGNiG’s share of gas will only amount to about 0.34 bcm (12 bcf) annually, suggesting that it needs to find substantial volumes from other sources if BalticPipe is to be a viable project.
Skanled also has implications for another proposed Baltic Sea pipeline, the Baltic Gas Interconnector linking Germany, Denmark, and Sweden. One of the objectives is to bring fresh supplies to Sweden, which is keen to boost the use of gas in its energy mix. Participants say, however, that the successful implementation of Skanled will likely render BGI uneconomic.
