A lot of Norwegians are skeptical about the potential for using the country's big gas resources in the domestic market. But Erik Brinchmann is convinced he can overcome these doubts.
Being president of Gasnor, the only natural gas distributor in Norway, puts Mr Brinchmann in a good position to pursue this evangelical mission.
His company had a difficult birth, after being conceived by enthusiasts with a vision of developing gas sales to Norwegian industrial operations.
Among these was Jon Gjedebo, founder of offshore technology company Hitec, who drew up plans in the late 1980s to tap into the Statpipe trunkline which carries gas from fields in the northern North Sea.
This Statoil-operated line makes an intermediate landfall on the island of Karmّy north of Stavanger, before continuing on with processed natural gas to continental Europe.
It took time to develop a pilot project to extract some of the Statpipe gas for use in the local region, and Mr Brinchmann says the biggest obstacle was a general belief that it would be uneconomic.
"These doubts were widespread in the oil companies and the Ministry of Petroleum and Energy," he recalls. "Fortunately, however, our plans also had their supporters."
He joined Gasnor in 1990, the year after it was founded by Hitec subsidiary Gasmet along with Statoil, Norsk Hydro and Saga Petroleum, and became its president in 1992.
Behind the creation of this company lay a realization that Norway was becoming increasingly dependent on importing electricity generated by coal-fired or nuclear power stations.
This development was taking place despite the fact that the country generated 30 per cent of Europe's hydropower, and held 45 per cent of its gas reserves as well as 75 per cent of its oil.
With one per cent of the continent's population, these resources put Norwegians in a position to produce more than 10 times their own energy consumption.
The first hurdle faced by Gasnor was to secure a sales deal with the Norwegian Gas Negotiating Committee (GFU), which has the job of concluding such contracts.
Nor did Norway have a regulatory framework for developing gas consumption. So rules from Sweden and Denmark were adapted, and strict but flexible regulations put in place.
Although market surveys indicated that Gasnor's plans would be profitable, it had considerable problems raising the necessary finance – not least because Norway's banks had been through a crisis in late 1980s.
"Everyone thought our ideas were exciting, and wanted to participate once we'd got going," recalls Mr Brinchmann. "But they felt this project needed to be funded by equity.
"We used our share capital of NOK 30 million to develop the project over several years and to implement the first development stage. And we finally got a long-term bank loan."
All the obstacles to getting a sales deal, securing customers and installing a gas distribution infrastructure led to a crisis in 1992, when staff and consultants were made redundant.
Mr Brinchmann and his loyal canine friend Daisy were left alone in the office building on Karmّy to pursue plans for Norwegian gas distribution.
"It was pretty depressing," he admits now.
But Gasnor survived and signed its first sales contract in the spring of 1993 with Hydro Aluminum’s Karmّy plant, which had been studying plans to use gas in place of heavy fuel oil for smelting.
This company had already paid for a T-junction to be installed in Statpipe on central Karmّy to allow the connection of a spur line, which was now laid to the plant. Hydro also invested NOK 40 million in a facility to receive and utilize the gas.
HM King Harald officially inaugurated the spur to the aluminum smelter on 30 May 1994 - opening a new chapter in Norway's industrial history. The ceremony was scarcely over before Gasnor had secured two new customers, giving it a combined annual sale of 25 million cubic meters.
It now has 14 customers, including manufacturers, hotels and hospitals, with another three-four in the offing. And 70 local vehicles - among them nine buses - run on gas.
They are supplied through roughly 30 kilometers of pipeline, installed at a cost of about NOK 75 million, and take 35-36 million cubic meters per year. That corresponds to around 375 gigawatt-hours, or the output of a medium-sized Norwegian power utility.
Mr Brinchmann is particularly proud of a new industrial estate on Karmّy which ranks as Norway's biggest non-oil manufacturing growth story of the past decade.
This expansion began when a local fish oil and meal producer, إkrehamn Sildoljefabrikk, decided to build a new plant rather than shutting down after 80 years of operation.
It saw a chance for future expansion by connecting to the local gas network, and sparked a public-private partnership which has achieved rapid development of the Karmsund Fiskerihavn estate.
In addition to the companies which took part in the move from إkrehamn, the Biomar fish feed specialist resolved to establish a facility there. Building alongside إkrehamn Sildoljefabrikk allows it to exploit waste from the oil/meal process.
New factories, buildings and quays followed, safeguarding 400 local jobs directly and indirectly and creating 130 new ones for a total investment of just over NOK 800 million.
"This is a textbook example of the unique value creation which can spring from access to natural gas," comments Mr Brinchmann. "Without it, the fish oil plant wouldn't have made its new commitment.
"Energy accounts for roughly 35 percent of costs in a facility of that kind. So securing supplies of gas at a competitive price was important."
Gasnor's next objective is to cross the Bokn Fjord south of Karmّy with a spur from Statoil's new Europipe II trunkline to Germany, and develop a distribution network in the Stavanger area.
Together with other players, the company has been pushing for years to get Norway's first gas-driven ferry operating on the Bokn Fjord - a project approved by the Sorting (parliament).
Diesel-powered ferries emit large volumes of nitrogen oxides, and the whole of south-western Norway is already overburdened with this pollutant.
However, the Mّre og Romsdal region further north beat Gasnor to the draw earlier this year when it gained the world's first gas-driven vessel to provide scheduled ferry services. This ship runs on liquefied natural gas from Statoil's Tjeldbergodden methanol complex, which lies in the area.
The Bokn Fjord region lacks access to LNG, and transporting it from Tjeldbergodden would cost too much. Gasnor has already studied opportunities for building a small local gas liquefaction plant.
In the meantime, the government's White Paper on a national transport plan - due this summer - is expected to include proposals for four new gas-fuelled ferries. Where they will operate remains unclear.
"An important job for us will be to continue promoting the virtues of natural gas," comments Mr Brinchmann. "With our eight staff, we're a pilot in developing gas use. But we can't pursue that nationally."
Getting Norwegians to utilize more of their own gas will demand heavy investment in infrastructure, and Mr Brinchmann sees this as a government responsibility.
He believes the minority Labor government which took office earlier this year will be aggressive in this area, and fulfill promises to draw up a unified strategy for using natural gas.
Norway produced about 43 billion cubic meters of gas in 1998-99, but only 700 million - 1.6 percent of the total - was utilized in Norwegian industry. Tjeldbergodden accounted for the great bulk, with Gasnor taking 34 million cubic meters.
"We're not using enough of this resource," Mr Brinchmann emphasizes. "Even if plans to build gas-fired power stations go ahead, our share will be small by comparison with what we export."
He sees two reasons why selling so much of the gas abroad represents a problem, including the fact that it reduces Norway to the status of a raw material supplier.
"Buyers in continental Europe are securing the big value creation downstream and following the gas through to the end user. Some of their products are even sold back to Norwegian customers."
Secondly, Norway is making large volumes of energy available to other European industrial companies which compete with its own firms. But Mr Brinchmann takes a bright view of the future and notes that other distributors are following up in promoting national gas consumption.
"If few people today believe in industry fuelled by gas, then nobody thought a century ago that we could industrialize Norway by harnessing hydropower resources on a national scale."
Source: Statoil.com.
Berit Bryne
© 2000 Mena Report (www.menareport.com)
