Norway supplies 25 per cent of the European Union’s gas imports, through an extensive network of sub-sea pipelines from the North Sea that reach shores in Emden (Germany), Zeebrugge (Belgium), Dunkerque (France), as well as in Easington and St. Fergus in the UK. In the transition to a carbon-free Europe, Norway’s oil and gas association finds several reasons to bet on continued business for gas. If only because there is not yet enough renewable energy to take its place, says Blindheim, in a phone interview with IE on September 24, 2020. To back up her argument, she cites Germany as an example.

“The steel producer Thyssen Krupp must use all the wind power that Germany has now, if they are to switch from coal and natural gas to renewable hydrogen in one of their large steel plants,” says Hildegunn T. Blindheim. “With natural gas, there are no limits. Natural gas is the only real alternative that can manage to supply the German market with the amounts of hydrogen that they say they should have to reduce greenhouse gas emissions.

How does the EU’s Green Deal impact opportunities to sell Norwegian gas?
 In a 30-year perspective, it will clearly be much more demanding. But for quite a few years to come, there will be a need for gas as a balancing force while coal and nuclear power are phased out.

The EU says they must use 25 per cent less gas in 2030. We can still maintain the volume of gas exports, because the EU’s own gas production will fall significantly. We can take larger market shares, both because we are competitive on price and because we have a smaller CO2 footprint than others. It is not a given that Norwegian gas will be phased out. That is not the concern for the next ten years.

You mean gas as gas?

Yes. We will not have large volumes of blue hydrogen for the coming ten years. This will not happen until later in the 2030s.

Various analyses show that gas volumes needed globally will not drop that much before 2040, as too much coal must be replaced. Gas production in EU countries will fall significantly towards 2030, so I have no doubt that Norway can continue to supply gas as a gas for many years to come.

Norwegian Oil and Gas Association.

For how long?

Gas in Europe will have to be more or less decarbonised by 2050. Going forward, we must therefore work to decarbonise the gas. If we can do that and store the CO2, we can have stable, large-scale production of hydrogen that can supplement sectors that cannot be decarbonised in any other way. This will be a low-carbon product that Europe will need.

If Europe is to establish hydrogen markets in the 2020s, then hydrogen must be made from natural gas. Natural gas is the only source that can create large enough volumes for major industries to rely on it in the very long term. Hydrogen can be made from renewable energy as well. But we won’t be able to produce large volumes of renewable hydrogen until much later. With natural gas, we can start production on scale for hydrogen with CO2 storage in the mid or late 20s.

But massive investment in carbon capture and storage is needed to make blue hydrogen. This has not yet been done. Massive investment is equally needed to develop renewable energy sources and expand the electricity grid to make green hydrogen. Why should the former be possible in the short term, and not the latter?

They go hand in hand — one does not exclude the other. On average, in a year, perhaps 25-30 per cent of electricity production in Europe comes from renewable energy. If you are to make large amounts of hydrogen from renewable energy by electrolysis, you have to eat from the renewable share that is developed, instead of replacing coal with the clean electricity.

It is difficult to have stable, large-scale production of hydrogen from renewable sources right away. Over the next 30 years, we will have so much development of renewable energy that green hydrogen will take a larger and larger share of the hydrogen market. But for the next 20 years, my analysis is that it is blue hydrogen — natural gas hydrogen — that will help us decarbonise difficult sectors much faster than green hydrogen can.

The EU says that it needs large amounts of hydrogen to be able to achieve its climate goals. This is a business opportunity for us.

Norwegian Oil and Gas Association

Where should the natural gas come from?

It makes the most sense to produce hydrogen in the receiving terminals in Europe, from where they import gas, or where they still have gas production from their own member countries. Such reception terminals are located by the sea. With a production plant for hydrogen there, the CO2 can be sent by ship back to the Norwegian shelf and stored. The hydrogen produced can then be sent in pipes to customers in Europe.

Germany is trying to become more energy independent by offering the United States to build even more LNG plants to import American shale gas into Germany — if the United States keeps its hands off the Nordstream 2 gas project. Is American shale gas not cheaper than Norwegian gas?

LNG is usually more expensive than Norwegian gas. We compete well in the gas market.

I absolutely understand that EU countries are building LNG terminals. They want high energy security. It is a top priority, and they want to have flexibility if there are problems with imports from, for example, Russia.

Doesn’t this threaten Norwegian contracts also?

No, I do not think so. We are probably seen as a stable and secure supplier. There are no political difficulties between Norway and the EU on this.

Norwegian Oil and Gas Association

One of the EU’s green transition processes is about so-called taxonomy, a classification of what should be allowed to pass as “green” enough to receive public financial support. A technical expert group has, in practice, excluded gas in the new standard. How serious is that for the oil and gas industry?

They have said that new gas pipelines cannot be considered green enough. I disagree with that. It is vital to build gas pipelines that can replace coal where it is needed in an intermediate phase. I would rather demand that new gas pipes be built in a quality that allows them to transport hydrogen or biogas in the future, whether it is hydrogen from decarbonised natural gas or from renewable sources. If you find investors who are willing to invest in gas pipelines, you can build them even if the EU taxonomy says this is not green.

Methane emissions from gas infrastructure are getting increasing attention due to new technology to measure them accurately. This means it is not generally obvious that gas is better than coal.

I cannot speak for all gas producers in the world. But for Norwegian, gas this is not true. We have an offshore industry with incredibly strict safety requirements. We are also not allowed to flare other than for safety.

If you have three per cent methane emissions throughout the chain, then the climate benefit of replacing coal with gas is zeroed. On the Norwegian continental shelf, it is less than 0.3 per cent in the entire value chain, from gas production on the Norwegian continental shelf it is even lower.

What is it on Russian installations?

We do not have good numbers there. But the difference between Russian and Norwegian pipe gas is that Russian pipelines run over land, and are not welded — which they have to be when they run sub-sea. So our pipelines are tight. They are closely monitored.

So if methane should become a major issue in the EU, Norway will have an opportunity to take market shares from Russian gas?

Yes, if the EU starts imposing requirements for upstream methane emissions on gas, we have a clear competitive advantage.

Many European environmentalists and researchers regard carbon capture and storage (CCS) as a dangerous deviation by an oil and gas industry trying to rescue its own business model. Are they wrong?

But the CCS development in Norway is not only driven by the oil and gas industry. The climate road map for land-based industry in Norway is based on achieving 60 to 70 per cent of emission cuts until 2050, with CCS. So this is as much driven by land-based industry. They are the ones who need the CO2 capture; the oil and gas industry can help store it.

The Norwegian Petroleum Directorate

In Europe, the CCS discussion started at the wrong point — and with scaremongering. The possibilities of storing CO2 on land were looked at, and the processes were poor. Neither the oil industry nor the authorities managed to convince the population that this is actually safe. But they do store large amounts of gas, in large facilities underground. That is something they are used to.

“The discussion about carbon capture and storage started at the wrong point and with scaremongering”

But right behind the steel industry and the others, many see the oil and gas industry wanting not to be shut out of the future. Is that not correct?

It is completely understandable that an industrial sector wants to contribute to technology development. The point is to reduce greenhouse gas emissions, not, as of principle, to phase out fossil energy. If we can produce gas in Norway with electrified platforms, decarbonise the gas and sell hydrogen that becomes emission-free, it is a zero-emission chain. Then there is no reason why it cannot be included in the energy mix. There is no deadline for how long gas can be in the energy mix. The point is to reduce emissions and supply markets with stable energy.

Do you see CCS as a way to ensure that the world will remain dependent on fossil energy well beyond 2050? 

That is not at all the main argument for CCS. The main argument is that there is a lot of land-based industry that has no other technology to reduce emissions than with CCS. Maybe we will get compact CO2 capture and storage facilities on our platforms in the end — we are also working on that. But the big emission cuts with CCS are from land-based process industries — cement, waste, steel and aluminium.

If, by 2050, we manage to find new production methods that make CCS redundant and that are more cost-effective, the market will also ensure this. The industry is working to find another way to produce steel and aluminium. But this work is in its infancy. We will be dependent on CO2 capture and storage for a very long time to come.

To me, it is an old argument that CCS is an extension of the fossil fuel industry. The UN Climate Panel’s 1.5-degree report shows that we will not only need carbon capture and storage from land-based industry. We will need extraction from the atmosphere — extraction of CO2 — if we are to be able to stay below the 2-degrees Celsius target.

“We can not pick just a few technologies we “like” or get hung up on old arguments that CCS is an extension of the fossil fuel industry”

We need absolutely everything from low-emission and zero-emission technology. We need a massive investment in renewable energy. As an industry, we can contribute there, especially on offshore wind. We need a massive investment in CCS, and in hydrogen — both blue and green. We can not pick just a few technologies we “like” or get hung up on old arguments that CCS is an extension of the fossil fuel industry. We will be dependent on oil and gas for much longer than most people want in many sectors and must have technology that reduces emissions from the use of oil and gas to achieve climate goals.

The Norwegian government has announced it will fund the first commercial chain for carbon capture and storage in Europe, to the tune of 1.6 billion euros. Captured CO2 from the Norcem cement factory will be shipped and pipe-lined to an injection well 2,500 meters below the seabed in the North Sea. What significance will this have for other such projects, globally?

The demonstration effect will be considerable. This is the first time this has been done in the industry in a so-called disintegrated chain; one company captures, another transports and stores the CO2. It is a great signal to the EU to get CO2 storage started on the Norwegian shelf. Equinor, Total and Shell work with industries that want to start CO2 capture projects at their facilities, and are waiting for this decision to be made.

The EU has been waiting for this — it has been the chicken and the egg for a long time. When Norway now decides on this, the EU can follow up by allocating money from the Innovation Fund and creating other incentives for the industry to start CCS projects.

It has been the chicken and the egg because it has been so expensive that no one has been willing to risk the investment. In Brussels, sources say that the oil and gas industry is not fighting for CCS at all. Is that correct?

That may have been true a few years ago, but it is not true now. The oil and gas industry in Europe is fully aware that we must get to CCS. But land-based industry in Europe is probably worried. This is a major cost to industry, and much of the land-based industry has low margins. They compete globally. We do not want the best industries in Europe to move to other countries without climate requirements. Norcem, a large land-based industrial company in Norway, cannot foot the entire bill for capture facilities, transport and storage of CO2.

Therefore, you need incentives to get it up and running, just as we have had for solar and wind.

I can understand that land-based industry has not exactly demanded that we put in place requirements for CCS. That doesn’t work unless the entire infrastructure with transport and storage is in place. The EU cannot require CO2 capture as long as there is no CO2 storage nor support schemes.

When this is in place in 2024, do you think there will be great interest in creating similar facilities elsewhere?

The Norwegian storage on the shelf will have much more capacity than what will come from the Norwegian capture facilities. So land-based industry in Europe can pay to store its CO2 on the Norwegian shelf.

“The oil and gas industry in Europe is fully aware that we must get to CCS. But land-based industry in Europe is probably worried”

I would think that the UK will move on, and there are projects in the Netherlands working on storage outside Rotterdam. We need all this. We can store a lot of CO2 from Europe on the Norwegian shelf. But the more such chains come, the cheaper the solutions will be, and the easier it will be for land-based industry in Europe to start capture projects.

An external quality assessment commissioned by the Norwegian government this summer warned that the CCS project risks becoming “significantly unprofitable”. Should this worry the taxpayers, who will foot the bill?

No, I don’t think so. The report looks at how much this will cost over an operating period of ten years. Norcem will not dismantle its capture facility after ten years after building it up. The report does not consider the entire lifetime of CO2 capture and storage.

The concern from the quality assessment is that this chain might not only be the first, but also the last. We must spread the technology. The potential for Norway is that we will export the technology to European industrial players. With the EU’s climate goals, I’m sure this will happen.