INTERVIEW: Norway well positioned to be reliable gas supplier next winter

Norway is well positioned to be a "stable and reliable" gas supplier to Europe next winter following the current period of summer maintenance on the Norwegian Continental Shelf, a top energy ministry official said June 22.

In an interview, State Secretary Andreas Bjelland Eriksen also said now was the "right time" to carry out any deferred maintenance on the NCS given high gas storage levels in Europe.

Operators on the NCS are currently undertaking a relatively heavy summer maintenance schedule, which -- combined with ongoing unplanned outages -- has curtailed Norwegian gas supplies to continental Europe and the UK.

Some of the planned maintenance work is being carried out now having been deferred because of the pandemic in 2020 and 2021 and the pursuit of sustained high Norwegian gas output during the energy crisis in 2022.

With European gas storage levels currently at historic highs for the time of year, Bjelland Eriksen said carrying out any deferred maintenance now made sense and would help prepare the system for the coming winter.

"We're in a good position to be a stable and reliable supplier of gas to Europe this winter," Bjelland Eriksen told S&P Global Commodity Insights by telephone.

EU gas storage sites are currently filled to 75% of capacity, according to data from Gas Infrastructure Europe.

And the EU's energy commissioner Kadri Simson said June 19 that Europe was "on track" to meet its 90% filling target well before the Nov. 1 deadline.

"With the kind of gas storage levels that we see in Europe right now, I think this is the right time to complete this maintenance," Bjelland Eriksen said.

"Given the circumstances, it was the right decision to delay maintenance until this period," he said.

Norwegian gas production has, however, been affected by the extension of maintenance at the key Nyhamna gas processing facility.

Nyhamna processes gas from the major Ormen Lange and Aasta Hansteen fields, which also remain shut in while the extended maintenance at the processing plant takes place.

Nyhamna was taken offline on May 19 for annual maintenance, affecting all of its 80 million cu m/d of capacity.

It had been expected back on June 14, but the restart was pushed back first to June 21 and then to July 15.

"It's important to get Nyhamna back online as soon as possible," Bjelland Eriksen said, adding that the companies involved were working hard to bring the facility back.

Shell serves as the technical service provider for the Nyhamna plant, while Gassco is operator for the facility.

Concerns over Norwegian maintenance contributed to the recent TTF gas price increase.

Platts, part of S&P Global Commodity Insights, assessed the TTF month-ahead price at a more than two-year low of Eur23.25/MWh on June 1, but it has seen a number of spikes in recent weeks.

The TTF month-ahead reached a recent peak of Eur41.03/MWh on June 15, according to Platts assessments, and was last assessed June 22 at Eur34.08/MWh, up by 47% since the start of the month.

Output measures

Bjelland Eriksen said the energy crisis in Europe had prompted companies on the NCS to take measures to support higher gas production.

"The last year-and-a-half has highlighted the importance of the production of the NCS, with the dramatic shift in the energy balance in Europe and reduced supply from Russia," he said.

"Companies on the NCS have taken several actions together with the government to find solutions to ensure that production can be kept as high as possible."

These included reducing the volume of gas injected back into fields for oil production and using the gas for export instead.

Total Norwegian gas output reached 122 Bcm last year, just shy of the record high of 122.4 Bcm from 2017, according to Norwegian Petroleum Directorate data. That helped offset the sharp cut in Russian gas exports to Europe.

Production is expected to remain steady until 2027, according to NPD forecasts from earlier this year.

"It is almost unfathomable to think about the volumes of energy that suddenly disappeared overnight," Bjelland Eriksen said in reference to the curtailed Russian deliveries. "That was a situation that we've never seen before."

Looking to next winter, Bjelland Eriksen said the outlook was relatively positive.

"With the gas storage levels that we see in Europe right now, with the LNG capacity that has been ramped up over the last year-and-a-half, with the maximum production that we maintain on the NCS, I believe we have a very good point of departure for the next winter season," he said.

But, he said, keeping a focus on collaboration to ensure the system was well maintained was key.

"We shouldn't forget that this winter could be colder than the last winter, it could be longer than the last winter, and there is always the risk of unprecedented events that could happen," he said.

Bjelland Eriksen said Norway remained focused on protecting its gas system, with numerous security measures in place.

"Security will always be at the top of our agenda. We will keep all measures in place that we believe are needed to safeguard our system," he said.

Security was heightened across Europe following the sabotage attacks on the Nord Stream and Nord Stream 2 gas pipelines in the Baltic Sea in September last year.

EU action

While Norway stepped up to boost gas supplies to Europe last year, the EU also implemented a number of measures to tackle the energy crisis.

These included the gas market correction mechanism, demand reduction targets, storage obligations, and the joint gas purchasing scheme.

In September last year, Norway agreed with the European Commission to set up a task force whose aim was to ensure any measures implemented would not impact European gas supply security.

Bjelland Eriksen said Europe had been able to strike a good balance between the different considerations at play and ended up with a series of "balanced measures".

But, he said: "Measures that have been put into place throughout the energy crisis in the past year-and-a-half should be re-evaluated. It is important both for Norway and Europe to have well-functioning markets with as little market intervention as possible."

Looking further into the future, Bjelland Eriksen said more activity would be needed on the NCS.

"We can keep the current high production that we have today for the next 4-5 years," he said. "But after that period, further field development and further exploration activity are important."

He also said it would take time for Europe to transition to a new energy system and that blue hydrogen would have a role to play in a low-carbon future.