World's Energy

Aug 27, 2008 - Scan Oil&Gas - German gas companies E.ON Ruhrgas and Verbundnetzgaz are growing their offshore field stakes in Norway despite the €60-million ($88 million) price tag of some deepwater wells and buyers back home saying “No” to gas deliveries. Soaring gas prices have driven some of Germany’s 400-odd gas companies to start rejecting gas supplies, a German source told Scandoil.com at the ONS 2008 tradeshow in Stavanger. Yet, diversifying supplies is the stated goal of both German gas companies, and Norway has grown in importance as a supplier. The oil-rich country vies with Russia to deliver about half of E.ON Ruhrgas’s supplies. “Every year, there is a narrow race between the two, and sometimes it’s just how we optimize the contracts that decides who’s No. 1,” E.ON chief executive, Dr. Berønhard Reutersberg said. Germany is Norway and Russia’s largest gas buyer, and E.ON Ruhrgas is their largest customer. Reutersberg said security of supply was his company’s top issue, although more gas for Germany could lower prices for the company’s domestic customers. Gas rival Verbundnetzgaz is also keen to enlarge its own supply of Norwegian gas, and despite the prohibitive cost of drilling, the company is sharing the cost of its first four exploration wells off Norway in 2009 with operators Total, Endeavour and oil company Det Norske Oljeselskapet. “It’s cheaper in the short term than paying $100 million to get in on a producing license,” the source said. Both German companies riled by European Union rules aimed at liberalizing gas markets which are aimed at countries with traditions of large stately gas companies. Germany has hundreds, and pipelines are run by regional entities with diverse ownership structures. Dr. Reutersberg, meanwhile, said falling central European production will keep him focused on Norway. His target for E.ON Ruhrgas E&P in Norway is 10 billion cubic metres per year. “We are very keen to grow in Norway,” Reutersberg said. He said investments in the Nordic country were growing and the company expects over 1.8 Bcm this year from eight field stakes, including four field assets it operates. Reutersberg said he was grateful Norway changed its rules five years ago to let powerful integrated energy companies onto the Norwegiean continental shelf. But he said the policy “might have been too successful”. “Not all of the 50 newcomers to Norway have been successful,” he said.