European gas market 'still vulnerable' despite lower prices: Equinor CFO

The European gas market was "still vulnerable" despite lower prices, and a number of factors could put pressure on prices ahead of next winter, a senior official at Norway's Equinor said May 4.

Speaking following first-quarter results, CFO Torgrim Reitan also said Equinor had produced from its Norwegian gas assets at maximum capacity during Q1 and had not implemented any commercial turndown.

Reitan said the mild winter in Europe had helped bring prices down.

"But the gas market is still vulnerable. And looking ahead to next winter, storage levels will again depend on weather, demand across Europe and China, and LNG capacity," Reitan said.

"These factors can easily put pressure on prices in a tight market, and small changes can lead to significant fluctuations."

European gas prices are well down on the record highs from last summer, with Platts assessing the Dutch TTF month-ahead price on May 3 at Eur36.70/MWh ($41/MWh).

Equinor's Norwegian gas output in the first quarter averaged 806,000 b/d of oil equivalent, up 1% year on year, with no production deferred during the period.

"We continue to have high gas production from the Norwegian Continental Shelf to Europe with no deferral of gas volumes this quarter," Reitan said.

In the fourth quarter of last year, Equinor held back some Norwegian gas production, with output averaging 791,000 boe/d.

Equinor regularly optimizes its Norwegian gas production depending on price, deferring output from one period to another if prices are higher in the latter period.

Forward curve

Reitan said the company's production strategy for the next few quarters would be "steered" by the forward curve.

"If there are big changes in the outlook for gas, it gives an incentive for us to optimize the production profile," he said.

"The forward curve is rather flat so there are fairly limited signals now to make commercial hold-backs over the next few months."

Platts assessed the Dutch TTF Q3 price at Eur38.40/MWh on May 3, a slight premium to the month-ahead assessment of Eur36.70/MWh.

Reitan said Equinor's Norwegian gas production remained strong and reliable. "We produced as much as we could during the quarter. And that gas was needed in Europe," he said.

"We have increased production permits from the Norwegian state. So, we will produce more as long as we have those in place, and we do expect that to continue for quite a while."

He added, however, that Equinor would carry out maintenance at a number of key assets in 2023, including at Aasta Hansteen and Troll.

Total Norwegian pipeline gas exports to Europe and the UK remain above the five-year average, according to S&P Global Commodity Insights data, as high prices continue to incentivize producers to ramp up output.

Re-injection strategy

During 2022 Equinor also diverted gas -- usually re-injected into oil reservoirs -- instead for exports and Reitan said that strategy would not change. "We have no plan to switch back to injection."

"This is something that is relevant for Gina Krog in particular, but also a series of other fields on the NCS," he said.

Reitan said that while gas prices had come down, they remained historically high. "And we do expect a rather tight market in Europe during the year. So, we are prepared for a lot of volatility on the gas side."

Asked about the EU's initiatives to secure gas supplies, including its new joint purchasing mechanism, Reitan said Equinor was open to participating in the scheme.

The first demand aggregation under the new EU tool was launched late April with the first tender to be put out to potential suppliers later this month.

Reitan stressed that any deals would have to happen on commercial terms. "It will be supply and demand that ultimately sets the price for the market."

Equinor also exports LNG from its Hammerfest LNG plant and Reitan said the company had flexibility around its LNG sales.

"We steer them to the best paying markets," he said, adding that Equinor carried out diversions of cargoes to Europe away from their original market destination

"When we see large geographical differences between Asia, Europe and the US, that typically generates trading opportunities related to LNG," he said.