Maintenance On Norway's Giant Gas Processing Plant Extended Till July

A maintenance outage at Norway's Nyhamna gas processing plant will take at least a month longer than anticipated due to problems with the plant's cooling system, plant operator Shell Plc. (NYSE:SHEL) has said. 

Shell has stopped all non-essential work after discovering a gas formation with hydrogen, terming the situation ‘‘complex’’. Located in North-western Norway, the Nyhamna gas processing plant processes gas from the Ormen Lange and Aasta Hansteen fields. With 79.8 million cubic meters (mcm) of export capacity per day, the plant is one of Northern Europe's largest gas processing facilities, producing enough gas to meet 20% of the UK’s needs.

Norway has become the largest supplier of natural gas to Europe after the continent cut ties with Russia following its war in Ukraine. Norway's pipeline gas exports to continental Europe have been robust in the current year, with flows averaging 313 million cu m/d.

Although Putin has repeatedly warned Europe about an impending gas crisis, most experts do not consider this a big risk considering that the continent needs to put a smaller-than-average volume of gas into storage in the current year after a mild winter left the region with record high inventories. The smaller refill requirement is actually one of the biggest factors that have been weighing down prices for deliveries this summer. 

Still, prices are likely to be higher next winter because limited storage is an imperfect replacement for imports. Consequently, futures prices have been moving into an increasingly steep contango to cover storage costs, divert some LNG to other markets, incentivise more consumption this summer, and also encourage conservation during winter. 

Overall, the European Union and the United Kingdom have capacity to store ~1,129 terawatt-hours (TWh) of gas, good for 21% of annual consumption, according to data compiled by Gas Infrastructure Europe (GIE).

By Alex Kimani for Oilprice.com

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