There is no Battlefield canon. BF1942's World War II doesn't shape the sci-fi tundra battles of BF2142, and buying XP boosters as a cartoon Nazi has no bearing on Bad Company 2's royal rumbles. The developers, DICE, go where they want, and after years of circle-strafing around the subject, it's time for Battlefield 3.

My first glimpse of it at DICE's Stockholm HQ is a bit of a shock: singleplayer, urban. DICE briefly mention that there will be multiplayer on the same scale as Battlefield 2, but retreat from any specific talk of it. For now they're showing the strides they've made with their wonderful Frostbite engine – now up to v2.0 – and demoing the setting and the singleplayer.

You'll play Sgt Black, part of a four-man squad in a city on the Iran/ Iraq border, patrolling the streets for insurgents. As if that locale wasn't unstable enough, it's also built on a faultline. And it's a towering, glittering city, not the dusty, clichéd Middle East tips we're used to seeing. Cast in highcontrast blueish light, it's gorgeous.

Black's squad winds through the city listening to Johnny Cash's 'God's Gonna Cut You Down', proving that DICE are effortlessly cool. They disembark from their APC, and are following orders and cutting through alleys when a tremor shakes dust loose from the surrounding buildings. Knowing DICE, and the destructive capabilities of the Frostbite engine, I start to wonder. Bad Company 2 introduced dynamic destruction to the PC: small squat buildings that could be blasted full of holes or crumble under tank blasts. Nothing bigger than a few stories. But this is an updated engine, tailor made. A destructible city? They couldn't... Could they?

The tremor subsides and the patrol continues, through a building and out into a makeshift carpark, just a small square between more buildings.

Perfect ambush territory. From a balcony overlooking the square, an insurgent fires down at the squad, dropping one of the men instantly and forcing the others to take cover behind cars. The square is suddenly alive with gunfire. Before there's time to take stock, a terrorist squeezes in between Sgt Black and his men, and the game drops to slow-mo for a second, before the terrorist is headshot. The downed teammate calls for help, and Black drags him out of the fight and into cover. Rescue injured squaddies, take them out of the fight, and they have time to recover.

In any other game it would be an effort to dig the terrorist on the balcony out, but Battlefield's destructible scenery changes the way you think about cover. Concentrated fire on the concrete chips away a hole, exposing him. He flees. Destruction is a lot more subtle in Frostbite 2.0.

With the ambusher gone, it gives the squad more room to manoeuvre. Little ground-level battles weave in and out of the parked cars. When it's over, Black's squad pushes on.

It's significant how DICE are handling the story bookending all this action. Battlefield 2 was the original over-the-top modern combat game. With the arrival of the Modern Warfare series, they could easily have re-engineered their game as a political blockbuster, but the story of Battlefield 3 goes in a different direction.

Karl-Magnus Troedsson, DICE's general manager, explains. “I don't think we have, like, some arty-farty agenda. I'm not saying that they have, don't quote me on that! Sometimes I get the feeling that some developers make a game because they want to make a statement. It might be compared to writing a book, or writing an idea on a blog, or something like that. We make games because we love playing games. We still make Battlefield games because we still love to play our Battlefield games. It's like cops and robbers, cowboys and indians, it's like shooting around when you're a neighbourhood kid and you were playing on the street.

“The setting we choose is more about how we can gain enough interest, and we know that a healthy level of controversy and realism always gets people's attention, and that's the kind of space we want to be in. Do we want to go over the top and raise people's eyebrows and get people to ban the game and get attention? No, that's not really what we do.”

The demo cuts to a rooftop a few minutes later. The squad are now under fire from a single sniper who, in a neat reversal of the previous action, is blasting away chunks of their own cover. One by one they crawl (you can go prone!) to the edge of the building, to a concrete lip that provides some shelter. Even so, it's crumbling under the sniper's attention: each huge, concussive bullet blast sends chunks of wall spilling over the rooftop. Black collects a rocket launcher, the team blindfires over the wall, and he pops up and launches. He's not entirely accurate, but it doesn't matter. The entire facade of the building the sniper was stationed in shivers, then falls off. Dust billows out from each storey, and the floors crumble, making the exposed inside of the building frown like big, sad face. Yeah, he's dead.

Black barely needed to aim: as long as he hit the building that sniper was going to suffer, and I now know a lot more about the subtleties of scenery destruction in Frosbite 2.0: it works on a both a smaller scale than in Bad Company 2, and a larger. The building they just destroyed was much bigger than those of BC2, yet it didn't collapse all the way. It was later confirmed to me that while you can do a lot of damage to the city structures, only prescribed ones will be able to fully collapse. The rest will just turn into swiss cheese, at least enabling new hollows of cover to be carved out of their husks.

It's not all wanton destruction. The next section brings a surprising change of pace: Black is alone in a building, following a wire to a bomb. This disarming sequence is interrupted by an insurgent, and there's a brutal quicktime event, left and right mouse buttons controlling his fisty pummelling. Ordinarily I would be wary of filler material like this, but it comes as a welcome respite from the firefights and carnage. It's also amusing that in a game built for large-scale destruction, Black is actually stopping a bomb from going off.

The calm doesn't last. Black runs out into a large battle on the city streets, abandoned cars and military vehicles providing cover. Rather than freeform, it feels tightly scripted: he moves through it to a bridge overlooking the road, firing down onto the rushing insurgents, thinning their assault. The ratatat of his rifle is drowned out by the whumph of the helicopter that backs him up. Even so, the insurgents rush under the bridge and over to the other side. Black retreats from the bridge to the street, to the abandoned military vehicle. Again, it feels more like a scripted event than an emergent battle, but it has a point. He's holding off the insurgents, rattling off bullets as the support helicopter comes back for a second strafing run at the enemies.

Then a full-on earthquake hits.

It shows just what DICE are capable of with their engine. The ground rips and tips. Giant, ragged tears appear in the concrete. The buildings begin a slow, inexorable collapse. One takes out the helicopter, others fall into each other. In about five seconds, the whole city has changed: the ground is at odd angles, tilted underfoot. Buildings are lying on their sides, broken and ragged. I imagine scrambling through them, trying to escape insurgents while worrying about the inevitable aftershocks. The scale of the destruction is astonishing. Everything as far as the eye can see has shifted, the air is full of dust, the towering cityscape that impressed me at the start of the game just doesn't exist anymore. This is why DICE have been building the Frosbite 2.0 engine.

So, yeah. They did.