With this week’s announcement of the approval of Snøhvit Future, an electrification project at Europe’s first LNG plant, the Norwegian government facilitates for extended LNG production towards 2050 at Hammerfest LNG, Melkøya. Geopolitical considerations and energy security are key drivers for the approval, as the LNG plant accounts for five per cent of Norwegian gas exports. At the same time, the government underscores the importance of decarbonising the oil and gas production and achieving Norway’s goal to reduce climate gas emissions by 55 per cent by 2030.
The Snøhvit Future project entails electrification of the LNG plant, replacing power from gas turbine generators with renewable power from the onshore grid. Whereas the annual emissions as a result will be significantly reduced, contributing to the achievement of climate goals, the project has been controversial. Whereas there is a shortage in electricity in the area and other industries’ demand for electricity increases due to the green transition, electrification of the Hammerfest LNG plant is estimated to entail an increased need for electrical power of up to 3.6 TWh per year. This amounts to more than two per cent of Norway’s annual electricity consumption. To meet these concerns, the government also launched a plan for increasing power production and grid capacity in the Finnmark region. The plan is expected to spark new power production projects in the region.
The government sent four key governance signals:
- The Norwegian Water Resource and Energy Directorate will prioritise licence applications relating to grid and power production in Northern Norway, especially in Finnmark
- The Minister of Petroleum and Energy, Terje Aasland, will through dialogue with Statnett ensure that Statnett prioritises grid development in Northern Norway, especially in Finnmark
- Norwegian geopolitical interests and considerations will form part of the Ministry of Petroleum and Energy’s assessment of the economic basis of measures which increase grid and production capacity in Finnmark.
- The Norwegian government will establish a security policy forum for the development of energy systems in Northern Norway.
BACKGROUND
The Hammerfest LNG plant and the Snøhvit Future project
The Hammerfest LNG plant, located on the island of Melkøya outside Hammerfest in Finnmark, has been in operation since 2007. The plant receives gas from the Snøhvit field in the Barents Sea through a 143-kilometre pipeline. At the plant, the gas is cooled and transformed to LNG, before being stored in designated tanks and shipped to locations in Norway and other countries. At normal production, Hammerfest LNG produces around 6.5 billion cubic metres of LNG per year.
Approximately 13.2 billion NOK will be invested in the upgrade of the Hammerfest LNG plant. The net value of the Snøhvit Future project is expected to amount to 56.3 billion NOK (before tax). The government also expects the project to generate significant value creation in Norway, and particularly in Northern Norway, in terms of employment and local and regional service deliveries.
A plan for increasing power production and grid capacity in Finnmark
Grid
An increased power production and the establishment of new industry initiatives in Finnmark relies on a strengthened grid capacity in the region. Against this background, the Norwegian government launched a plan for promoting an increase in power production and grid capacity in the region. The plan involves granting Statnett a licence for the construction of a 420 kV power line from Skaidi to Hyggevatn in Hammerfest, and a licence to Equinor for the construction of a 132 kV power line from Hyggevatn to Melkøya. The power lines will increase the grid capacity to Hammerfest. This will strengthen the power infrastructure in the area, thereby facilitating new regional industrial developments. The Norwegian government’s aim is that new infrastructure for electrical energy in Finnmark should be in place by 2030, and that the production of renewable energy shall cover at least the increased energy needed for the electrification at the Hammerfest LNG plant by 2030.
Power production
It is expected that the governmental focus upon increasing grid capacity will result in new onshore wind projects. Reportedly, applications and notifications of wind power projects equalling the production of 3,000 MW have already been submitted. Projects equalling the production 670 MW may according to the Minister of Petroleum and Energy be carried out by 2030. Projects equalling the production of 170 MW have already been granted a licence, but grid capacity is currently too limited for these projects to be realised.
Also offshore wind is anticipated in the area. Several new areas in the Barents Sea have been identified as potentially suitable for offshore wind. This could be of significance to the electrification of the Hammerfest LNG plant. Notably, on the day of the Norwegian government’s approval of the Snøhvit Future project, Enova, a Norwegian government enterprise responsible for promoting environmentally friendly production and consumption of energy, launched a programme for supporting floating offshore wind projects with up to two billion NOK this year.
Statkraft will consider the possibility for upgrading the Alta Hydroelectric Power Station.
