Norwegian gas production was 11.2 bcm in January, flat y/y. It was the first month since June 2018 in which production did not decline y/y. Production could well remain soft until Q2 19, when a much lighter maintenance schedule y/y and a ramping-up of Aasta Hansteen should boost flows, particularly in May. We should then see a y/y decline in production return in Q3 19, due to a much heavier maintenance schedule and expected soft gas balances. Production in Q4 19 should then rise y/y as a number of new fields are expected to come online. We forecast production in summer 2019 will be down y/y by 2.1 bcm in aggregate, while total 2019 production will be 1.5 bcm lower y/y at 120.1 bcm.
In summer 2018, there were initial expectations that Norwegian gas production in winter 2018-19 would see a boost owing to strong European demand and the start-up of the new Aasta Hansteen field. Instead, a slow start to life stemming from a number of commissioning problems has so far largely shut-in Aasta Hansteen output. With the new field stuttering, natural field declines have shown evidence of accelerating, with non-flexible Norwegian supply dropping by around 1 bcm y/y over Q4 18, according to the latest field level data available. Norwegian producers have been reluctant to turn up flexible supply to offset those declines while European balances have been comfortable. Over Q4 18, Oseberg output was 0.3 bcm lower y/y. The Oseberg Vestflanken 2 project came online in October 2018, but the project is focussed primarily on increasing oil production until July 2019, after which gas output will rise by about 2-3 mcm/d, according to Equinor. Troll output fared slightly better in December 2018, rising by 70 mcm y/y to 3.4 bcm, after posting a 0.5 bcm y/y drop in November 2018. However, a much sharper increase in flexible output would have been needed to offset the declines elsewhere in Q4 18.
With demand forecast to remain soft the rest of this winter, we expect total flows to remain slightly lower or flat y/y in March. Aasta Hansteen finally returned to full service on 15 February, but the boost from the new field is likely to only offset the declines from older fields. We expect total flows to ramp-up in May, when maintenance is scheduled to be nearly 0.5 bcm lighter y/y, but the rise is likely to be short-lived. Norwegian output should fall in Q3 19, when maintenance cuts are a massive 3.6 bcm heavier y/y. The expected heavy Norwegian maintenance in Q3 19 has reinforced the contango in the TTF Q2 19-Q3 19 spread, pushing Q2 19 to a 25 cent/MWh discount on 18 February, from a 25 cent/MWh premium at the start of the year.
|Fig 1: Production forecast, bcm, y/y||Fig 2: TTF Q2 19-Q3 19 spread, €/MWh|
|Source: NPD, Energy Aspects||Source: Reuters, Energy Aspects|