European natural gas prices remained strong this week after Norway announced additional capacity cuts due to unplanned maintenance works, adding more uncertainty to Europe’s supply and demand balance.
Despite Europe’s storage facilities being nearly 92% full well ahead of the winter heating season, a three week stretch of planned maintenance that got underway this week, along with unplanned work as well, has the market on edge. The Title Transfer Facility has held near $13/MMBtu this week, well above where it was earlier in the year as supply risks and geopolitical instability have elevated the contract.
While seasonal maintenance is usually scheduled during the summer months when demand is low, Norway is now Europe’s largest gas supplier since Russia cut off most gas exports to the continent in 2022 after it invaded Ukraine.
Norway's Kollsnes gas processing plant has an ongoing capacity reduction of 18 million cubic meters per day (MMcm/d) until Sept. 2, followed by a 61 MMcm/d reduction for two days until Sept. 4, according to grid operator Gassco AS.
Norwegian gas volumes will be over 120 MMcm/d lower during maintenance, or about 4.2 Bcf/d. That’s about a third of average flows to Europe.
Last year, Gassco delivered 109.1 billion cubic meters (Bcm) of gas via its 5,470-mile pipeline network to Belgium, Denmark, France, Germany and the UK. Between January and July, Norway delivered 79.2 Bcm of gas, compared with 64 Bcm during the same period last year.
Norway's new role as Europe's top gas supplier, has it planning to keep output strong. State-owned Equinor ASA’s intends to invest $5.7 to $6.7 billion to deliver 40 Bcm of gas to Europe annually until 2035.
The Norwegian Petroleum Directorate (NPD) said in December the 122 billion cubic meters (Bcm) of natural gas that Norway has produced since 2022 is projected to continue at the same level for the “next four to five years.”
However, the NPD warned that the country’s oil and gas production will peak by 2025, with over $1.42 billion at risk of being lost if the country fails to maximize oil and gas projects in the Norwegian Continental Shelf (NCS).
“Equinor is expected to invest firmly in exploring for new discoveries that could help offset the decline from Norway’s largest hubs in the longer term,” Rystad Energy analyst Mathias Schioldborg told NGI.
Equinor is the largest company on the NCS, and is set to play a key role in maintaining existing production hubs and developing new oil and gas projects in the region.
After completing its ongoing greenfield development portfolio – comprised of projects like Yggdrasil, the Johan Castberg floating production unit and subsea tiebacks – Rystad Energy expects Equinor will sanction a set of small- to medium-scale projects towards 2035, primarily aimed at prolonging the life of producing hubs.
“This portfolio includes projects like Ringvei West, Peon, Linnorm and the third phase of Johan Sverdrup, and will help see Equinor maintain a high investment level towards 2035 – although the largest chunk of investments are foreseen to come before 2030,” Schioldberg pointed out.
Equinior is also expanding its upstream portfolio in other regions. This includes the current development of Rosebank in the United Kingdom, the Bacalhau and Raia Manta floating production units in Brazil, as well its LNG project in Tanzania, among others.
