Norway's Equinor expects 'volatile' European gas market in short term

London — Norway's state-controlled Equinor expects a "volatile" European gas market in the short term on the back of the recent tightness in the global LNG market and low European winter temperatures, CEO Anders Opedal said Feb. 10.

Speaking to reporters following the publication of Equinor's Q4 earnings, Opedal also said he anticipated a return to a more balanced European gas market over the coming 1-2 years.

European gas prices have risen from lows of just over Eur4/MWh ($4.8/MWH) last summer to more than Eur20/MWh in January, according to S&P Global Platts price assessments. The TTF day-ahead price was assessed Feb. 9 at Eur19.80/MWh.

Opedal said the recent elevated gas prices in Europe followed LNG market tightness -- which saw cargoes diverted to Asia and away from Europe -- and the resulting increased demand for European pipeline gas.

Higher European gas demand due to unseasonably cold weather and fewer LNG imports also resulted in higher withdrawals from storage, he said, impacted also by the delay to the start of the Nord Stream 2 gas pipeline from Russia to Germany.

Because of these factors, Opedal said: "I think we will see a volatile market."

The recent market dynamics have also given "support for a positive outlook for prices, also coming into the summer season", he said.

Further out, Opedal said Equinor expected the market to be more balanced "when we move a year or two ahead".

The 55 Bcm/year Nord Stream 2 link had been due to start up at the end of 2019, but the threat of US sanctions has led to delays in its completion.

As a result of the delays, Gazprom must rely either on booking more short-term capacity via Ukraine if it wants to increase exports to Europe or on continuing to draw down its remaining gas stocks in Europe.

LNG exposure

Opedal also said Equinor was "increasingly exposed" to LNG prices within its portfolio, given the impact of global LNG market dynamics on European gas.

"We saw that when Asian [demand] was spiking due to cold weather and LNG outages, we have also seen the price increasing in Europe due to LNG being moved to Asia," he said.

Equinor did not have to have physical LNG production assets to be involved in the LNG market, and that the company used "contractual arrangements" to manage its portfolio and participate in the LNG trade, he said.

Equinor operates the 4.3 million mt/year Hammerfest LNG export facility in Norway and has term commitments for supply from the plant.

However, it has been shut since September after a fire.

A company spokesman told Platts on Feb. 10 it was still Equinor's best estimate that operations at Hammerfest LNG would resume in October.

Q4 output

With the outage at Hammerfest -- fed with gas from the Snohvit offshore gas field -- Equinor's equity Norwegian gas production in Q4 slipped by 4% year on year to 698,000 b/d of oil equivalent.

Its average realized gas price in Europe was $5.04/MMBtu in Q4, up from $2.72/MMBtu in the previous quarter.

Despite the year-on-year drop in Norwegian gas output, the company increased production compared with Q3 when it averaged 654,000 boe/d.

Equinor deferred some gas production from its main 'flex' fields on the Norwegian Continental Shelf -- Troll and Oseberg -- last summer due to very low European prices.

"We increased our NCS flex gas production to capture additional value as the European gas prices continue to recover through the fourth quarter," CFO Svein Skeie said.