Norway Natural Gas Supplies Drop After Plunge in Prices

SEATTLE (Oil Monster): Norway is scaling back its natural gas output as prices in Europe trade near their lowest in three years.

Europe’s biggest supplier after Russia has reduced its gas shipments by 16% since March, cutting flows into the UK’s Easington terminal by more than 80%. The country’s network operator Gassco AS has indicated that the producer Equinor ASA is shuffling plans for maintenance, which may be prompting some of the lower flows. Equinor declined to comment on the link between maintenance and shipment levels.

The moves help shield the European gas market from oversupply as deliveries of liquefied natural gas cargoes and shipments through pipelines from Russia continue at strong levels. 

Norway also may be using the gas to reinject into some of its mature oilfields, boosting production of crude at a time when the price of that commodity is rising.

“Equinor have the ability to flex,” Nick Campbell, a director at industry consultant Inspired Energy in England. “They may take a more commercial view on export into the UK and the continental markets especially. Northwest Europe currently remains the sinkhole for global LNG, and storage levels are already filling up, reducing demand.”
Earlier this month, Equinor said it has “some flexibility” to trim supply from key fields including Troll and Oseberg.

Gas prices have eased in recent weeks after a warmer-than-usual winter left storage levels higher than the five-year average. March is traditionally the end of the peak heating season when gas demand is strongest and the point when traders begin refilling depleted inventories.

The lower level of exports from Norway may prevent UK prices “from crashing down even further,” said Alun Davies, director of Europe power and gas at IHS Markit.

Russia shipments remain relatively strong, though they are down 9% to Europe and Turkey so far this year amid the milder weather.

Europe’s gas markets probably will have an oversupply of 7bn cubic metres this summer, which will put even more pressure on prices, according to modelling by BloombergNEF. That’s the equivalent of a month’s average supply in Britain.

The UK within-day contract has declined 39% since the start of the year. The Brent crude oil benchmark meanwhile has increased 37%.

Equinor has adjusted its maintenance schedule for both Troll and Oseberg in the past week. These are the fields where oil output can be boosted by pushing more gas into the structures.
Meanwhile, the main UK export route, the Interconnector pipeline between England and Belgium, closed for maintenance last weekend until May 1. That prompted within-day prices in Britain to plunge 26% on April 23, the most in more than a year. The link typically helps ship excess gas to mainland Europe amid lack of storage in Britain during the summer.
“Norwegian fields such as Troll and Oseberg are normally used on a seasonal basis and help to balance the European gas markets,” said Murray Douglas, research director for Europe gas at Wood Mackenzie Ltd. “It looks like Equinor is picking some discretionary volumes to keep them for the future, which is not something unusual to see in periods of low prices.”

Courtesy: www.gulf-times.com