Collapse of gas treaty talks worries power firms: As North Sea deal with Norway stalls, Eggar announces fast-track offshore licensing

NEGOTIATIONS between the British and Norwegian governments over trade in natural gas have collapsed, dealing a blow to the energy companies, including National Power and Scottish Power, which want to import gas from the Norwegian sector of the North Sea.

The UK has imported gas from Norway's Frigg field under an agreement signed in 1976. But the Frigg field is coming to the end of its life and the agreement ends this year.

There had been hopes in the electricity and gas industries that the two governments might renegotiate a deal under which the pipeline could be used to import gas from other fields, not allowed in the original treaty.

A spokeswoman for the Department of Trade and Industry said: 'Negotiations have stalled - there is no meeting of minds.' The Government was keen to reach an agreement but it was proving difficult to make progress.

In 1991, National Power signed a deal with Norwegian companies, including Statoil and Norsk Hydro, for the supply of enough gas to fuel two large combined-cycle gas turbine power stations for 15 years.

National Power, which did not disclose the value of the deal, has said all its new power stations in the foreseeable future are likely to be gas-driven.

It was hoping to take first deliveries of the Norwegian gas in the middle of the decade. A spokesman said: 'We remain optimistic that ultimately the agreement will go through.' Earlier this year, Scottish Power announced a pounds 100m agreement with Statoil to import gas from Norway's Froy field.

Scottish Power's subsidiary, Caledonian Gas, will use the supplies to compete with British Gas.

The breakdown in talks emerged as the Government announced that gas production in the UK North Sea increased 17 per cent last year while oil production rose more than 6 per cent. Fifteen new oil fields and nine gas fields began production.

Publishing the figures, Tim Eggar, Energy Minister, said: 'The report demonstrates that while the UK Continental Shelf is now a mature province it is certainly not stagnating. After 30 years of exploration, a substantial amount of oil and gas remains to be found.'

Mr Eggar also announced a new fast-track approach to offshore licensing, which means that for the first time the Government is inviting applications for two licensing rounds in one year.

The 15th round focuses on mature areas of the North Sea while the 16th concentrates on areas near the coast where there may be environmental sensitivity or where the interests of other users of the sea must be taken into account.

(Photograph omitted)