Report on Gas to Wire on the North Sea
The gradually declining gas production activity from the Groningen field raises the attention for the offshore gas production on the Netherlands’ continental shelf of the North Sea: can enhanced North Sea gas production partly compensate for the declining onshore production, and so contribute to mitigate energy import dependence? In a recent study by EDI part of New Energy Coalition, which has been carried out within a consortium of partners (Circular Energy BV, NEC, PZEM, eRisk Group) such a typical case has extensively been analysed with the help of an excel-based NPV-model.
To answer this question it is not only important to answer where separate North Sea gas fields are located, but also to assess if its gas production has a positive business case. A special category of these fields are those that are so small and isolated that connecting them to shore with the help of a gas grid connection is not feasible. The only option left then is to see if an alternative way to channel the energy to shore is feasible, namely via a (hopefully nearby) existing power grid connection, after the gas has been converted ‘on the spot’ into power. Ideally such power would be ‘green’ to the extent that the carbon component of the natural gas can be captured and stored underground.
The crucial issue regarding such isolated fields is if producing the gas, turning it into ‘green power (based on CCS) and transporting the power to a nearby grid connection, delivers a sufficiently positive return-on-investment, given the associated risks.
In the model 3 components in the production / conversion phase have been distinguished, namely the hydrocarbon extraction component, power generation & distribution component and carbon capture & storage component.
Based on the quantitative analysis the following generic conclusions could be drawn:
- Compared to conventional CCGT power plants a total CO2-emission reduction of about 13 Million tonnes could be achieved during the 30 years of operation considered in this project.
- Cooperating flexible and clean power generation from natural gas and variable power generation of wind farms in terms of shared electric infrastructure are mutually supportive by ensuring that the taken investments are used in a very efficient way (gas power plant makes use of electric infrastructure when wind farm does not operate on full capacity) and thereby also benefit onshore system balancing.
- The fiscal regime differs significantly between conventional hydrocarbon extraction (E&P) businesses and power generation businesses. Since this unique project describes basically a combination of both as a single entity, the choice of an applicable fiscal regime has a large impact on the business case.
The set of conclusions has confirmed the overall impression that it is indeed worthwhile to inventory which of the small and isolated North Sea gas fields can be economically explored via the delivery of green power rather than (green) gas.
In case you’re interested in reading the full report, please contact Malte Renz.
