New investment models for gas infrastructure on the Norwegian Continental Shelf

Abstract

This master thesis is a study of how new investment models for gas infrastructure can contribute to realization of new gas resources on the NCS. It analyzes the separation of gas infrastructure from the rest of the field development and compares the result with the present investment model. The analysis also explores new potential investors that could invest in large gas infrastructure projects. The findings indicate that the IRR of the new model gives a higher rate of return on the field development by separating gas infrastructure from the rest of the field development. The results show a difference of 4,48% between the present and the new investment model, which indicate that a separation of gas infrastructure can lead to realization of more gas resources on the NC. The IRR is mentioned her since it is an important financial decision making tool in this thesis. The study explores the gas infrastructure history on the NCS and explains the corporate structure and the regulations of different companies, organisations and governmental bodies. The regulation of the gas transportation tariff is important for the analysis to be able to calculate the cash flow for the gas infrastructure investment. The IRR indicates that there are two potential investors of the gas infrastructure for the new investment model, which are Investment funds and the Norwegian government. Since the tariff is regulated to yield a reasonable rate of return of 7%, other potential investors indicate that the rate of return is too low to be profitable. E&P companies have to find large gas reservoirs to compensate for the regulated rate of return to meet their rate of return demands for investing. The analysis is based on modern financial decision making theories. Studies show that choosing the new investment model could relieve E&P companies form binding large amounts of capital in gas infrastructure; this gives them the opportunity to dedicate their capital to their core competence areas, exploration and production.