February saw Norwegian production log its first y/y increase (of 0.2 bcm) since June 2018, totalling 10.2 bcm, despite a loose European supply-demand balance on exceptionally mild weather and strong LNG sendout. The production increase was aided by Aasta Hansteen’s ramp-up, following technical issues that had affected output since the start of the year. We forecast total production gains to continue into Q2 19 (+0.8 bcm y/y) before heavy maintenance works in Q3 19 result in growth falling by 2.7 bcm y/y. Soft European balances during the summer due to higher y/y storage levels will provide little incentive for Norwegian producers to run the flexible fields hard in Q3 19 to offset the heavier maintenance schedule.
Latest field data available for January—the first month since June 2018 not to see production decline y/y—showcases the impact of Aasta Hansteen’s slow ramp-up. Output from non-flexible fields have logged y/y declines of 0.5 bcm on average each month since July 2018, but production only slid by 0.2 bcm in January on better output at Aasta Hansteen. Flexible production from Oseberg also stepped up (+94 mcm y/y), more than offsetting a decline at Troll (-27 mcm y/y).
We expect Norwegian production growth to continue into Q2 19, totalling 29.4 bcm, on greater output from Aasta Hansteen and the lighter maintenance schedule. As opposed to previous years when heavier works took place during the first half of summer, Q2 19 maintenance constraints stand 0.8 bcm lighter y/y, which should facilitate greater output. The trend reverses in Q3 19, when constraints climb to 5.6 bcm, a hefty 3.9 bcm higher y/y, which will weigh on production. We forecast Q3 19 production to shrink by 2.7 bcm y/y, to 26.8 bcm. The expectation of very soft European balances which are sitting heavy on TTF prices across the curve suggests there is going to be limited incentive for NCS producers to push higher output from Troll and Oseberg to limit the impact of the scheduled maintenance on output levels.
The heavy NCS maintenance schedule have helped deepen the contango in the TTF Q2 19–Q3 19, with the Q2 19 TTF contract trading at a 32 cent/MWh discount on 15 March, from an 18 cent/MWh discount a month earlier.
|Fig 1: Production forecast, bcm||Fig 2: Summer maintenance, mcm|
|Source: NPD, Energy Aspects||Source: Gassco, Energy Aspects|