Skanled project suspended

The Ministry of Petroleum and Energy has been informed today that the participants in the Skanled pipeline project will suspend the project. The difficult financial situation has weakened the gas market outlook and the non-Norwegian participants in the project do not find it economically attractive to transport gas to Europe through Skanled and further on through Denmark.

- I am disappointed that we cannot move forward with the Skanled project at this time. It is a sad day for Grenland, says Mr. Terje Riis-Johansen, Minister of Petroleum and Energy. The industry is shaken by the financial unrest and the Skanled pipeline would have contributed to industrial development in the Grenland region. The Skanled project has been important to me and to the Government, and we have done all that can be done to realize the project. Without participation from the non-Norwegian companies, it is not possible to achieve sufficient use of the pipeline. I believe that an economic upturn may give a new basis for this project at a later stage, says the Minister of Petroleum and Energy.

In April 2005, the Ministry of Petroleum and Energy gave Gassco the task of assessing the basis for developing a gas pipeline from Kårstø on the West Coast to Rafnes on the East Coast. A group of participating companies was established in December 2005. In order to establish a sufficient market basis, they decided to study a wider scope with supplies to Sweden and Denmark. An important driver for the companies was to ship Norwegian gas to e.g. Poland. From the start, the project included a separation plant at Rafnes where most of the ethane was to be extracted from the sales gas and be used in the INEOS petrochemical plant. Yara would also replace the current ethane feedstock with methane from the pipeline. The sales gas would then be recompressed for further transportation.

In the autumn of 2008, the financial unrest hit the economy. This affected the Skanled project. In January, INEOS stated that they did not wish to construct a separation plant at Rafnes due to developments in their product markets. The Skanled concept was changed and included from then a spur line to Grenland, but no separation plant. The new concept had sufficient capacity for the needs of Yara and the possibility of new industrial development. In February 2009, the Government took further action by its willingness to take an ownership share of up to 30%. The EU has indicated that they could support the Skanled project and the onward link through Denmark to Poland with 150 million Euros.

Skanled is a large and complicated project. The participating companies have spent 125 mill. NOK in the project Both the framework and the scope has changed along the way. The difficult financial situation has now made the project impossible to carry through. The demand for gas is reduced. Hence, the gas market outlook has weakened compared to what it was some months ago. The prospects for achieving acceptable terms for transport of gas from Skanled to Europe, through the Danish gas transport system, are considered to be highly uncertain. The non-Norwegian companies have indicated that the commercial basis for the project is insufficient. Gassco has therefore stated that the partnership in Skanled will suspend the project.

The partners in the Skanled project are Petoro AS, PGNiG, E.On Ruhrgas AG, Gasunie, Energinet.dk SOV, Verbundnetz Gas AG, Skagerak Energi AS and Göteborg Energi AB.

You’ll find Gassco’s press release here.