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Norwegian liquids production fell by 31 thousand b/d m/m to 1.82 mb/d in January, lower y/y by 0.2 mb/d (-10%). The m/m decline was led by a 47 thousand b/d fall in crude output, which sank to a four-month low of 1.46 mb/d. Crude supplies once again underperformed NPD’s expectations, which had already baked in output falling to a 30-year low this year. With no major reported field outages in January, the data suggests underlying field declines at sites such as Troll, Ekofisk, Aasgard and Oseberg. Norwegian output is set to fall again, according to the February loading programme. North Sea differentials strengthened in January, although the expected restart of Libya’s Sharara field by end-February will likely cap further gains for light grades. Moreover, sharply weaker naphtha and gasoline cracks are also creating a significant price divergence between light and heavy grades in the region, especially amid a dearth of medium and heavy sour grades globally due to falling Venezuelan and Iranian supplies.
We forecast a 73 thousand b/d fall y/y in liquids output in 2019, which would reflect a third straight year of declines. If the January data is anything to go by, there is clear downside risk to this figure, especially with early indications of heavy maintenance at Ekofisk and neighboring fields in June. Beyond 2019, the key pillar of supply growth for Norway is the Johan Sverdrup field, which at capacity could produce 0.66 mb/d (from two phases). The field is expected to ramp up to phase one capacity of 0.44 mb/d within 12 months, although we believe this may be overly ambitious given that only eight wells have been pre-drilled. Should the field hit capacity in 12 months, crude supplies would register y/y growth by 0.22 mb/d in 2020. However, we think a more realistic ramp-up target is closer to 18 months, yielding growth of 0.15 mb/d in 2020.