London, 25 July (Argus) — Norwegian state-controlled energy company Statoil's gas trading operation lost money in the second quarter of this year, as continued technical problems at the giant Troll swing field meant that the firm had less production flexibility to trade around.
“The trading organisation makes money out of the flexibility at Troll,” chief financial officer Torgrim Reitan said today. “And because there is less flexibility they are unable to make as much money.”
Statoil has embarked on a strategy of granting its customers more spot indexation in their long-term supply contracts in return for clawing back the flexibility that they previously had to nominate higher or lower receipts. Statoil has used this reclaimed flexibility to trade more aggressively, withholding supply from the market when prices are lower and ramping up exports when prices are higher.
But the breakdown of one of the compressors at Troll has severely curtailed Statoil's flexibility. The company should still be able to reach the field's production cap — roughly 30bn m³ over a gas year — but the lost compression capacity has significantly reduced its ability to “profile” its production, Reitan said.
And the problem is likely to persist well into next year. The new compressor is expected to be installed by the second half of 2014.
The compressor issue in effect means that the firm's peak winter production capacity has been cut, and that to meet the field's output cap it must produce more gas during the summer months than is optimal given the premium the market places on winter supply.
Troll produced 8.9bn m³ of gas in the first quarter of 2013, down from 10.5bn m³ a year earlier and the least for the period since 2006. It produced 4.8bn m³ in April-May, down from 5.3bn m³ in 2012, but well above the five-year average for the two months of 3.7bn m³.
Field-by-field data since May are unavailable, but Norway's aggregate June production was 940mn m³ above the Norwegian Petroleum Directorate's expectations, while July's production is on course to be at least 920mn m³ above expectations, even before Snohvit LNG production is taken into account.
But the stronger production has been met by unusually strong summer injection demand, as European storage inventories are replenished after being drawn down heavily over the past winter. Gas prices through the summer months have been comparable with the past winter, Reitan said.
NBP everyday prices have averaged roughly 65.2/th so far this summer. The winter 2012-13 contract delivered at about 69.2p/th.
Statoil's equity gas production on the Norwegian continental shelf fell by 7.2pc on the year to about 99mn m³/d in the second quarter, despite stronger than planned output. Some of the decline was deliberate, but some was attributable to the problems at Troll and to an extended shutdown of the Snohvit liquefaction plant.
Statoil expects seasonal maintenance to strip about 9mn m³/d from its production during the third quarter.
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