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Wednesday, April 24, 2024

Statoil gas deal biggest since ’90s

A major gas supply deal signed this week between Statoil of Norway and Wintershall of Germany is worth NOK 100 billion and ranks as the biggest since the 1990s. Statoil’s stock slipped the day the deal was done, though, possibly because it exposes Statoil more to the spot market.

Statoil will use its established pipeline system to send natural gas from the Norway to Germany. PHOTO: Statoil/Helge Hansen

Top executives of both Statoil and Wintershall, the German oil company that’s been expanding rapidly in Norway itself lately, nonetheless celebrated the deal with some champagne at Winterhall’s office in Bremen.

Statoil CEO Helge Lund claimed the agreement to deliver 45 billion cubic meters of natural gas over the next 10 years to the German and other northwest European markets “demonstrates the continued competitiveness of Norwegian natural gas in the German energy mix.”

He also thinks the sheer size of the deal confirms “how important natural gas will be in shaping the long-term German energy system.” As a fossil fuel, gas isn’t as popular in Germany as renewable energy, but Lund prefers to view gas as “the least CO2 intensive fossil fuel” that can contribute to further reduction of carbon emissions in Germany.

Even though Norway already is the second-largest exporter of natural gas to Germany, with a market share of around 25 percent, Lund thinks Norway can deliver a lot more. Norway has abundant supplies of natural gas, he notes, and an established infrastructure that provides long-term stable and secure supply. The gas in the Wintershall deal will be delivered through existing pipelines from the Norwegian Continental Shelf, with most of it landing at Dornum and Emden in northern Germany.

Statoil’s shares fell 0.8 percent when the deal was signed on Tuesday, though, with some analysts linking the drop to increased exposure to the risks of the spot price for gas. Newspaper Dagens Næringsliv (DN) reported that Statoil gave in to pressure from European gas customers and tied the deal to spot prices, not developments in the oil price.

“The gas market is changing character,” Eldar Sætre of Statoil told DN. “Our contracts have to adapt to this. We can’t have a product that’s not competitive in the European market.”

Wintershall CEO Rainer Seele called Statoil “a long-term and reliable energy partner” and said the deal itself was a “significant milestone” for Wintershall, which is a wholly owned subsidiary of BASF. “This means we can also use the volumes we produce from the North Sea in Europe in the future without having to expand our own infrastructure,” Seele said.

Wintershall Norge is active on the Norwegian Continental Shelf, with more than 40 licenses and operations worldwide.

Views and News from Norway/Nina Berglund

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