Britain Faces Difficult Winter Due to Tight Norwegian Natural Gas Supplies

Britain is likely to face a tight winter for natural gas as it finds itself with few alternative sources of cheap natural gas, forcing it to rely heavily on Norwegian supplies, where production is already lower than normal.

The problem is that the Troll field, Norway’s largest natural gas field which produces 35 percent of the country’s natural gas output, has had to reduce its capacity for most of the year, and the field’s operator Statoil expects this lower production level to continue into next year.

Morten Eek, of Statoil, said that they “expect to see somewhat reduced capacity into the winter at the Troll field due to technical issues at Troll A.”

Gassco, the country’s natural gas system operator, has estimated that production capacity would be reduced by 34 million cubic metres a day until September 2014; far less than the 120 million cubic metres a day that was being produced before the capacity cuts were made.

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Anette Einarsen, a gas analyst at Thomson Reuters Point Carbon, said that “Norway normally produces gas at full capacity during the coldest months, and Troll's outage leaves no flexibility to ramp-up production to meet peak demand in case both the UK and continental Europe freeze.”

Britain has always been reliant on Norwegian imports, but this is set to increase as Russian gas is expected to go to continental Europe, and LNG imports from other countries will be sent to the Asian markets.

Should the Norwegian supplies fail to meet British demand, then more gas could be imported from Russia, but this will come at a high cost, as Russian prices are much higher than those offered by Norway. Russian gas would cost an estimated 74-78 pence per therm, compared with current UK prices of 65 pence.

Britain could also import LNG from places such as Qatar, but again, prices will be much higher as demand from Asia is high, and forces prices up. LNG would cost around $15.5 per million Btu, equivalent to 155 pence per therm.

By. Joao Peixe of Oilprice.com