Total Norwegian production was 9.3 bcm in June, up by 0.73 bcm (8%) y/y. It was the second consecutive month in which production was higher y/y despite heavier scheduled maintenance constraints, and suggests that producers opted to offset lost maintenance volumes by turning up production from flexible fields like Troll. Our forecast for total Norwegian production in 2018 is now 124.9 bcm, up by 0.7 bcm y/y, and an upward revision from last month’s forecast of 124.4 bcm owing to the very strong May-June receipts that have been recorded. For 2019, we forecast total production of around 119.7 bcm.
Pipeline exports to Europe are on track to be broadly flat y/y in July. But with total supply to NW Europe in July set to be lower on poor LNG sendout and Nord Stream maintenance in the second half of the month, Europe is likely to still have a y/y storage gap at the start of August. With the need for injections likely to provide price support, strong Norwegian supply should be encouraged. Gains y/y in August are likely to appear, but should be modest as they will be growing on a seasonally high base of about 0.31 bcm/d.
The y/y rise in Norwegian production in June was not totally unexpected given May’s y/y increase, but the strength of the rise was impressive, given that June was the summer month with the greatest y/y increase in scheduled maintenance constraints. A total of 1.4 bcm of production and processing capacity cuts were scheduled in June, the second highest for a month this summer and 0.5 bcm more y/y. Strength in output in June is due to a continuation of the driver that boosted supply in May—high output from flexible fields. Troll posted a 0.85 bcm (38%) y/y production increase in May to 3.06 bcm, despite a Kollsnes shutdown at the end of the month.
Aggregate Norwegian exports to Europe have been fairly steady so far this month at an average of just below 0.32 bcm/d, just 2 mcm/d lower y/y. As in previous years, planned maintenance constraints are the lightest in July compared with the other summer months, with just 0.10 bcm of capacity cuts, 27 mcm more y/y. Given that July 2017 production forms a very high base— output was 15% higher compared to the previous two-year July average—we do not see production in July 2018 being higher y/y, but a tight supply-demand balance and high prompt prices should support flows enough for them to remain broadly flat y/y.
|Fig 1: Planned constraints v actual production||Fig 2: Production forecast, bcm, y/y|
|Source: NPD, Energy Aspects||Source: NPD, Energy Aspects|