(Bloomberg) — Norway’s massive natural gas industry is about to undergo its annual major maintenance routine at a crucial time for the entire continent.
For about three weeks from the end of August, Europe will not have enough gas to meet the daily gas needs of Italy or France. While the work is routine for gas plants in the summer – when demand is usually lower – the stakes are high this time as the work coincides with a period of strong price volatility.
The European gas market has been particularly sensitive to disruptions this summer as heatwaves elsewhere in the world increased competition for the fuel. Traders are bracing for a possible halt in supplies from Russia following a Ukrainian incursion on the Russian border, and an escalation of the conflict in the Middle East could mean further problems.
“Europe is already struggling,” says Florence Schmit, energy strategist at Rabobank. “Any deviation from the planned maintenance season can lead to significant fluctuations in gas availability and thus in market prices, especially this year.”
Since Moscow’s invasion of Ukraine two years ago plunged Europe into a desperate battle for gas supplies, Norway has overtaken Russia as Europe’s largest gas supplier and is largely dependent on a single company: Equinor ASA.
During previous rounds of maintenance, it has often been the case that the schedule changed during the process. The repairs require careful balancing of pipeline pressures and due to the complexity of the assets and the harsh environment of the North Sea, it is not unusual for additional work to be discovered.
The importance of the repair season for Europe’s energy security was highlighted last summer, when unplanned work at some Norwegian plants drove up prices. More recently, in early June, a small crack in a pipeline in the Sleipner Riser field disrupted supplies to the UK and also caused prices to soar.
“There will always be deviations from the plan; something takes longer or shorter and that affects the rest of the work,” says Alfred Skar Hansen, senior vice president of system operations at Gassco AS, which operates Norway’s giant Karsto power plant and is also responsible for the country’s pipeline network.
Karsto is one of the plants that will be completely shut down during the work. Production in the huge Troll field, which is monitored by Equinor, will also be reduced. For about three weeks, Norwegian gas volumes will be over 120 million cubic meters lower per day, or about a third of the usual gas volumes to Europe.
“The risk is being assessed to ensure the lowest possible loss of production,” said Equinor spokesman Gisle Ledel Johannessen. “The level of maintenance and turnaround activity this autumn is quite normal and we are well prepared.”
On the positive side, the continent’s storage facilities are fuller than usual at this time of year, reaching the crucial 90 percent mark two months ahead of schedule, which can cushion minor setbacks. The continent has also rapidly expanded its renewable energy capacity and built up liquefied natural gas infrastructure to import fuel from elsewhere.
Still, Europe is still weeks away from the official start of the heating season, when demand usually rises, and it also faces strong competition from Asia and elsewhere for LNG cargoes. If something goes wrong, it could mean higher prices for both the industry and consumers.
“The challenge is that something unexpected happens,” says Hansen of Gassco. “It’s very difficult to be prepared for everything.”
©2024 Bloomberg L.P.
