Gassco – background, creation and function

Controlling transport from installations on the NCS to terminals on land confers considerable power. That applies not least to gas pipelines and processing plants, which require heavy investment in fixed facilities. As early as the days of Arve Johnsen, its first CEO, Statoil/Equinor has given a high priority to acquiring such control.

Substantial structural changes occurred in gas transport on the NCS from the mid-1980s. Among other factors, these were closely related to stronger coordination between the Norwegian petroleum companies. Key developments later include the EU’s gas market directive and Statoil’s partial privatisation.

Coordination

The roots of a formal coordination of gas transport from the NCS through a dedicated unit extend back to the mid-1980s, when the gas negotiating committee (GFU) was established by the government. Its members were Statoil, Norsk Hydro and (until 1999) Saga Petroleum. Although the state oil company still sat in the driving seat, it had occupied an even more powerful position earlier.[REMOVE]Fotnote: Tamnes, Rolf, 1997, Oljealder 1965-1995, vol 6, Norsk utenrikspolitisk historie: 207-208.

The sales agreements secured by the GFU were not tied to specific fields. Deciding where the relevant gas was to come from was up to the Ministry of Petroleum and Energy, with the gas supply committee (FU) playing a key advisory role. This was established in 1993 and had members drawn from both the Norwegian Petroleum Directorate and various oil companies.[REMOVE]Fotnote: Pedersen, Morten and Nygård, Håvard, 2005, “Norsk gass til Europa”, Norwegian Continental Shelf, no 2,  https://www.npd.no/fakta/nyheter/generelle-nyheter/2005/Norsk-gass-til-Europa-/, accessed 2 May 2022.

Further developments with gas exports up to the early 2000s must be viewed in relation to several broader contexts, first and foremost Norway’s affiliation with the EU through the European Economic Area (EEA) agreement – in force from 1 January 1994 – and the partial privatisation of Statoil.

Gas market directive and privatisation

The EU’s gas market directive was approved in 1998 after lengthy tussles. It represented an important element in the liberalisation of Europe’s gas market, a process which had been under way since the 1980s.[REMOVE]Fotnote: Norwegian Official Reports (NOU) 2012: 2, Utenfor og innenfor – Norges avtaler med EU, part 3, section 19.1.4, Ministry of Foreign Affairs. It would soon be placed firmly on the agenda in Norway. The EU took the view that the GFU hindered free competition and thereby breached section 53 of the EEA agreement, which prohibits illegal price fixing and other forms of cartel activity.[REMOVE]Fotnote: NOU 2012: 2, op.cit. After threats of massive fines from the European Commission, the Norwegian government wound up the GFU and agreed to incorporate the directive in the EEA agreement.[REMOVE]Fotnote: NTB, “Full gass i kampen mot milliardbøter”, Stavanger Aftenblad, 29 September 2001: 8. Specifically, this also meant that players other than the owners of the gas infrastructure had to be allowed to use the system on the same terms.[REMOVE]Fotnote: Berrefjord, Ole, 2003, “Gassco AS – etableringsårene i tilbakeblikk”. Årbok 2003, Norwegian Petroleum Museum: 36; Pedersen, Morten and Nygård, Håvard, op.cit.

Where the partial privatisation process was concerned, it eventually became clear that the government would reduce its shareholding in Statoil by about a third. The company was also allowed to buy 15 per cent of the state’s direct financial interest (SDFI) in the petroleum sector.[REMOVE]Fotnote: Transferred from Statoil to the state as part of “clipping the company’s wings” in the mid-1980s.

These developments became key components in the restructuring of Norway’s oil and gas industry around 2000. This was relevant here because it led to new ways of organising future management and operator assignments. The gas market directive’s requirement for equal treatment of all the players, for example, led to a discussion on operating the gas infrastructure.

The solution was to establish Gassco in 2001. Another key question was how the state’s remaining SDFI assets should be managed. That was resolved in the same year by founding Petoro. A common denominator between these two companies was that they were established as a result of the changes around 2000. Both also had historical ties to Statoil. Where Gassco was concerned, the connection was that – as operator for the gas infrastructure – it largely took over a type of assignment which had previously been discharged by the state oil company.

Gassled

As part of the restructuring of Norway’s petroleum sector in this period, the government also worked to coordinate equity interests in the gas infrastructure on and from the NCS. This was achieved by establishing the Gassled joint venture on 1 January 2003.

Gassco’s role included serving as operator for Gassled’s gas transport facilities. That included maximising the efficient use of capacity in the system, as well as identifying and following up its future requirements. In addition to Gassled, Gassco has agreements with several other players.[REMOVE]Fotnote: Zeepipe terminal, Dunkerque terminal DA, Valemon Rich Gas Pipeline, Utsira High Gas Pipe, Knarr Gas Pipeline, Haltenpipe, Nyhamna, Polarled and Vestprosess DA, annual report, Gassco, 2020: 6, https://gassco.no/contentassets/eea250112ca64631b555b431561d4b10/gassco-aarsrapport-2020-norsk-orginal-godkjendt-endelig.pdf, accessed 2 May 2022.

Gassco today

The company has its head office at Bygnes north of Stavanger, and branches in Germany, Belgium, France and the UK.

An important part of its work in planning future transport opportunities for gas relates to the Barents Sea, where a significant proportion of future resources on the NCS are expected to lie. How far developing gas transport solutions in and from these waters will be profitable is a key question, which relates to the ability and willingness to coordinate resource utilisation there.[REMOVE]Fotnote: Annual report, Gassco, 2020: 21-22.

Gassco was the operator in 2020 for deliveries totalling 107 billion standard cubic metres (scm) of natural gas to European customers. In energy terms, that represents 1 178 terawatt-hours (TWh).[REMOVE]Fotnote: Ibid: 17 Mainland Norway consumed 235 TWh in 2018 – in other words, roughly a fifth of the energy exported from the NCS.[REMOVE]Fotnote: Norwegian Water Resources and Energy Directorate (NVE): Samlet energibruk, https://www.nve.no/energibruk-effektivisering-og-teknologier/energibruk/samlet-energibruk/?ref=mainmenu, accessed 2 May 2022. Since its establishment, Gassco has transported 1 968 billion scm of natural gas.[REMOVE]Fotnote: Gassco feirer 20 år, https://www.gassco.no/media/nyheter/gassco-feirer-20-ar/, accessed 2 May 2022.