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StatoilHydro Want to Double Access to Natural Gas Storage

Norwegian oil and gas group StatoilHydro wants to double its access to natural gas storage and may convert some gas to electricity to gain better prices for its energy

Norwegian oil and gas group StatoilHydro wants to double its access to natural gas storage and may convert some gas to electricity to gain better prices for its energy, it said on Monday.

Rune Bjoernson, Executive Vice President for Natural Gas, said StatoilHydro would continue to be Europe's second largest supplier of gas after Russia's Gazprom, with a large network of pipelines to a number of western European countries.

"We will try to gain storage...looking to more than double our access to storage capacity... and increase the scope of our trading activities," Bjoernson told a news conference focusing on gas after the company reported third-quarter earnings.

"We will also look into power opportunities -- if it makes sense to convert gas into electricity before we sell it. We will not approach that as a utility, it is simply to get a better price for the gas than we would otherwise get," he added.

Bjoernson said StatoilHydro's major gas customers - European utilities - were boosting access to and production of their own gas, showing the changing times in the industry.

StatoilHydro said the impact of the financial crisis and any economic slowdown was unclear, adding that it could hit demand in "any or all" of its gas markets across Europe and beyond.

Jan Rune Schoepp, vice president for Natural Gas strategy and analysis, said that he expected gas prices to rise relative to oil as demand for the relatively cleaner fossil fuel grows in line with tougher European rules to fight emissions of man-made gasses blamed for global warming.

Switching a coal-based power plant to a modern natural gas-fired one can cut carbon emissions by two-thirds, he said.

"Long and complicated supply chains are needed to secure supplies and Europe has to compete, this may lead to periods with arbitrage opportunities - which is good for flexible producers like us," he added. Norway has gas supply pipelines to Britain, France, Germany and Belgium.

StatoilHydro has also entered the liquefied natural gas market with the 2007 start-up of Snoehvit - Europe's first LNG export facility.

"Climate policies shift energy demand towards natural gas and can create robust development for the gas market," Schoepp said, adding that imperfect market structures can amplify price differences and arbitrage opportunities.

Author: Jo Amey