The Arctic gas epic has begun

Finally, Egil Gjesteland has been given go-ahead to carry out Finnmark's largest industrial projects ever, the construction of the LNG plant on Melkøya and the Snøhvit project. "I am looking forward to getting started. I have been working on projects for almost all of my active working life, and a challenge like this towards the end of it is inspiring," says the cheerful Rogalander.

Snøhvit is planned for completion in 2006, when the first gas is to be shipped. "Snøhvit gives Statoil an extra leg to stand on. Getting into the LNG market and in particular building and operating a large LNG plant are crucial for internationalising the company. We will become more interesting for foreign partners, and for us at Statoil this is a major challenge," Gjesteland says.


Due to the controversy surrounding the project, it has taken a long time before the partners gave the green light. Immense local pressure from politicians and business and industry in Finnmark and Troms forced the Norwegians to change the project's basic conditions to enable it to be realised. The licensees in the project needed to have a different tax regime if they were to obtain a satisfactory return on their investments. For the project is on the borderline economically with regard to the returns required by the authorities and licence holders. The Storting passed a change in the tax regime, which made the project profitable. That was all it took for Bellona, the Norwegian environmental organisation. It lodged a complaint against the Snøhvit project with the EFTA Surveillance Authority (ESA), arguing that the project was receiving an illegal subsidy. This happened in February, and just four months later the ESA rejected the complaint. The following day the parties decided to restart the project.

This postponement will have a big impact. "The summer months are crucial for carrying out the Snøhvit project. That is when we have the best conditions for working effectively outdoors. Unfortunately we have now missed half of this year's summer. We are working round the clock to speed up the plan so that we can make up for the lost time. We aim to meet our delivery obligations," Gjesteland emphasises.

Big investments

A total of NOK 46 billion is to be invested in Snøhvit. Of this amount, NOK 40 billion will go to the terminal and plant on Melkøya and a subsea production facility. Six billion will be spent on newly ordered LNG tankers. Six of the licensees have signed long-term charters with two shipping companies with three tankers each, while Gaz de France and TotalFinaElf will transport gas using their own fleet. The ships are by Moss Design and are to be built at a shipyard in Japan.

This sum also includes Statoil's project organisation. "The project is to be carried out with as large and comprehensive contract packages as possible, considering the market. It will reduce the project staff's time to interface checking."

The two first large contracts have already been placed. They are for the tunnel out to Melkøya and the groundwork for the receiving terminal and processing, storage and docking areas. All together 2.3 million cubic metres of bedrock will be blasted and relocated on the island. The main contract with the German firm Linde has also been signed, a so-called EPCS (engineering, procurement, construction and supervision) contract. While most of the engineering work will be done in Munich, Linde also has Norwegian subcontractors on the project. They are Aker Kværner for the barge and general engineering support and a constellation of Multiconsult and Barlindhaug for the construction side of the project.

In all around 30 contracts are to be awarded for development both on land and at sea.

Remotely controlled

Snøhvit will be the first gas field to be completely remotely controlled from land. The configuration with subsea wells where the well flow of gas and fluid is brought ashore and controlled from there, has never been done before. The gas will flow from three reservoirs: Snøhvit, Albatross and Askeladd. The gas coming ashore is a rich gas, but its composition will differ depending on the reservoir. The onshore plant therefore designed to handle 5.75 billion standard cubic meters per year (1 bar, 150 C). In addition there will be 800,000 tonnes of condensate and 300,000 tonnes of LPG (propane/butane). Statoil reckons that the plant will ship out LNG cargoes about 70 times per year.

Norwegian gas will be exported to the United States for the first time. "The various stakeholders have delivery commitments totalling 2.4 billion standard cubic metres of gas for the American company El Paso and 1.6 billion standard cubic metres of gas for the Spanish company Iberdrola. The remaining volumes of LNG will be taken by the other licensees, TotalFinaElf and Gaz de France," Gjesteland says.

Environmental dispute

Environmental questions and the goals of sustainable development continue to swirl around the project. Environmental activists are mobilising to prevent the development from taking place. And the big question involves the power plant that has to be built to run the facility, the emissions from which will be considerable. In addition, environmentalists are worried that Snøhvit will pave the way for oil activities in one of the world's most fish-rich areas. That is exactly why there are few projects whose environmental impact is reported in such detail as Snøhvit. "Power needs for the plant are great. Chilling the gas to minus 163 degrees Celsius requires a lot of energy. We considered connecting to the traditional land-based power grid, but there is not transmission capacity to Finnmark. Reinforcing the grid from Lofoten to Finnmark was out of the question for us. Both the implementation time including licensing and the costs made it impossible to realise this for the project. We need to generate the power locally."

"Besides, CO2 from the gas fields will be reinjected under the Snøhvit reservoir, so that CO 2 from the actual production of gas will not be released into the atmosphere.

Local support

When Snøhvit is developed, space has been reserved for an extra processing train. "We need to think about future expansions. The land terminal on Melkøya can be a node in the infrastructure for gas activities in the Barents Sea. We need to be prepared to receive gas from several developed gas fields in the future," says Gjesteland.

The development itself will have a major impact locally. Statoil estimates that it will spend around NOK 240 million annually on purchases from local companies in Troms and Finnmark counties. "I greatly appreciated the local involvement in this matter. I have only praise for business and industry in the north and all the local politicians for their efforts; they have helped to make the project a reality," Gjesteland concludes.

With that he whisked away in a taxi with Munich as his next stop.

Snøhvit project

· Europe's first export plant for LNG

· Extracting gas from the Snøhvit, Albatross and Askeladd fields and transporting it to an onshore terminal

· Receiving and processing plant on Melkøya outside Hammerfest

· Tanker transport of liquefied natural gas (LNG) to markets in Europe and the US

Extractable resources: 193 billion cubic metres of natural gas and 18 million cubic metres of condensate

Ocean depths: 250 - 345 metres

Development solution: Ocean floor development and pipeline transport to land

Pipeline: 160 kilometre long multiphase pipeline

Onshore facility: Melkøya, right outside the harbour approach to Hammerfest

Export: 5.75 billion cubic metres of LNG per year, equivalent to 4.2 million tonnes.

747,000 tonnes of condensate per year

247,000 tonnes of LPG per year

Shipping: About 70 cargoes of LNG per year

Markets: Long-term contracts with Iberdrola in Spain and El Paso in the United States

Project implementation: Start of construction, first half of 2002 - gas deliveries from second half of 2006

Investments: NOK 40 billion for developing fields and building pipelines and land facilities.NOK 6 billion for tankers.

Jobs: 350 - 400 new jobs in Hammerfest, of which 180 are at the LNG plant

Norwegian deliveries: During the development phase 2002-2006: NOK 10 billion

Local business and industry: NOK 600 million

During the operating phases: NOK 240 million per year in regional/local deliveries