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A more positive outlook for gas: an interview with Ole Njaerheim

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Ole Njærheim is the Vice President for marketing, sales, infrastructure and strategy at Petoro AS. In our interview with him, we discuss the growing optimism among European natural gas players, the challenge of reducing costs, and Petoro’s transition from coal to oil.

“We are very certain that our position in the European market will be strong also over the next ten years.”

How would you characterise the Nordic market for gas?

The Nordic market for gas is actually very small. Norway is a big gas producer but very little gas is used in Norway. In Denmark there is some gas usage, and also in Sweden and in Finland, but the market overall, in terms of gas, is very small due to the fact that we have a lot of other end use also in the Nodic countries.

So the gas that you are producing is being exported. The sort of things that you are looking for when you are here at Flame – what are the things that you want to hear?

I want to speak to the customers and the other players, and basically understand what they’re thinking and their outlook.

And what actually are your customers’ concerns and desires – what is it that you’re hearing from them?

Well I think that for many years the European gas market has been on a downturn, and there has also been quite a lot of negativity about the market. The last couple of years we have seen growth in the market, it is looking a lot more positive. And also from a global perspective gas is a very positive story. So I’m here also to say that we are actually very positive about the European gas market.

Could we talk pricing, because when you are exporting and when you have your customers you need to make money, and there is a lot of gas around at the moment. So how are you with your margins? Is it still a sustainable market for you?

Yes it is. We have been working very hard for the last couple of years on reducing cost and making sure that we are competitive when it comes to supplying the European market. Costs have come down a lot, and we continue to do so, and also we have a very competitive transport system, so I do believe that we are very competitive to supply the European market.

But there are new competitors coming on the scene all the time. There’s a lot of LNG, there are a lot more competitors, people trying to make as much money as they can – and in a market environment like that, is it still going to remain sustainable for you for five to ten years down the line?

Yes.

Probably ten years is too far for you to look down?

No, ten years is not too far to look down because we have gas resources that are in production, and they are very, very competitive in terms of marginal cost, so we are very certain that our position in the European market will be strong also over the next ten years.

Tell me about the next five years to ten years then as a whole – if you look ahead generally what do you see, and what are the challenges coming down the line for you?

The next five to ten years we are quite positive about. We believe that the global gas market will grow. You’ll also see some growth in the European market where gas will replace coal to a certain extent. For us it is about making sure that we can deliver our gas in a good way to the European market, and also keep our pipelines filled and do it in a good way.

What about regulation?

The upstream part is not regulated as the European market is, so we are not really subject to regulations - it’s only when we go downstream that we are subject to regulation.

And how does that work for you?

Well we sell most of our gas on a wholesale market, and we have to of course act according to the regulations, but we’re not really subject to the regulations.

Do you think if we were standing here talking in say one or two years time you’d still be as positive about the future?

Yes, I think so [laughs].

And your own internal energy mix? Do you see any change in that at all?

Yes. We used to have more revenues from oil for many years. Two years ago we started to have most of our revenues from natural gas, and that will increase going forward. We are becoming more of a natural gas company than an oil company.

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