The firm plans no significant ramp-up in output, but it says supply will continue to be steady, write Rachael Frost, Natasha Fielding and Antonio Peciccia
Norwegian state-controlled Equinor deferred fourth-quarter 2022 gas production from flexible fields "to periods with higher demand", the firm said on 8 February.
A combination of milder-than-average weather, full storage sites and sustained strong LNG supply weighed on northwest European gas prices in October-November, incentivising Equinor to turn down production from its flexible Troll and Oseberg fields. In particular, NBP prompt prices slumped as the UK struggled to absorb all its supply, with the Interconnector and BBL pipelines continuing to operate at capacity, as they had throughout the summer, and domestic consumption remaining well below average. Argus' NBP everyday price closed at an average of 150.2p/th below the summer 2023 contract in the fourth quarter and 167p/th below the winter 2023-24 price.
The ample time spreads in the NBP curve incentivised Equinor to use the flexibility in its production permits for Troll and Oseberg to hold back output. The firm has "no plans to significantly ramp up [gas output]", chief executive Anders Opedal says, although he also points to continued steady supply. It is "a little bit of a nervous market", he says.
Troll ran close to capacity in October-November — producing 7.15bn m³, slightly higher than 7.03bn m³ a year earlier. But output at Oseberg — Norway's other highly flexible field — fell to just under 720mn m³ from 1.35bn m³ a year earlier. Equinor has a permit to produce 38.5bn m³ from Troll and 7bn m³ from Oseberg in October 2022-September 2023.
Production deferrals and the divestment of its ownership in the Martin Linge field led to Equinor's Norwegian equity gas production falling to 791,000 b/d of oil equivalent (boe/d) in October-December from 813,000 boe/d a year earlier, although it was up from 773,000 boe/d in the previous quarter. Equinor completed the sale of a 19pc share in the 160mn boe Martin Linge field to private equity-backed Sval Energi in September, but retained a 51pc share in it.
Equinor traditionally has adopted a "value over volume" strategy, often opting to defer production into future periods when price curves display steep contango structures. Equinor typically has deferred production during summer periods, but it sometimes has opted for a postponement in the autumn when mild weather combined with full storage sites has limited Europe's ability to absorb supply. The most recent comparison is the fourth quarter of 2019, when strong LNG sendout coupled with record-high inventories across the region at the start of the heating season weighed heavily on northwest European prompt prices relative to contracts for delivery further into the future.
New fields may support output
Equinor's overall gas production rose by 8pc last year compared with 2021. The firm expects combined oil and gas output to ramp up by a further 3pc in 2023 and keep growing until 2026.
Norway has become Europe's largest single gas supplier after Russian imports dwindled in the wake of Russia's invasion of Ukraine, and new fields could support Norwegian output going forward. The 9mn m³/d Dvalin field came on stream earlier this month, having been repeatedly delayed from an originally planned January 2021 start-up. Equinor has also announced a new "commercial" oil and gas discovery in the proximity of Troll, named Rover Sor, that is estimated to hold 17mn-47mn boe of predominantly oil reserves, the firm says.
Equinor's exploration strategy is focused on reserves that could be tied back to existing infrastructure. Rover Sor is Equinor's seventh discovery in the area since late 2019, with the previous six holding an estimated 350mn boe in total.
