The European natural gas market is at a critical moment as Norway's massive natural gas industry is about to begin its annual large-scale maintenance.
The European natural gas market is at a critical moment as Norway's massive natural gas industry is about to begin its annual large-scale maintenance.
Starting from late August, Europe will face a natural gas shortage for about three weeks, with a supply gap equivalent to the daily natural gas demand of Italy or France. Although it is common practice to repair natural gas facilities in the summer when demand is usually lower, the risks are high this time due to significant price fluctuations.
This summer, the European natural gas market is particularly sensitive to supply disruptions as heatwaves in other parts of the world intensify competition for this fuel. Traders are preparing for the possibility of supply disruptions from Russia following the invasion of Ukraine's border, and escalating conflicts in the Middle East could bring additional troubles.
Florence Schmit, European energy strategist at Rabobank, said: "Europe is in a difficult situation. Any deviation from seasonal maintenance plans could cause significant fluctuations in natural gas supply, leading to market price volatility, especially this year."
Since the outbreak of the Russia-Ukraine conflict two years ago, Norway has replaced Russia as the largest natural gas supplier to Europe and is heavily dependent on the Norwegian state-owned company Equinor.
Norway has replaced Russia as the largest natural gas supplier to Europe.
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In the previous maintenance rounds, it is common to make changes to the plan. Maintenance requires careful balancing of pipeline pressure, and the complexity of the facilities and the harsh environment in the North Sea mean that discovering additional work is not uncommon.
Last summer, the importance of the maintenance season for European energy security was evident when unplanned maintenance on some facilities in Norway led to a surge in prices. Recently, in early June, a pipeline in the Sleipner Riser gas field developed a small crack, leading to an interruption in the supply to the United Kingdom and a subsequent spike in natural gas prices.
Alfred Skar Hansen, the Senior Vice President of Operations for Gassco AS, said, "You will always see situations that are not in accordance with the plan; some tasks may take longer or shorter, which can have a ripple effect on the rest of the work." Gassco AS operates the Karsto large-scale plant in Norway and is responsible for the country's pipeline network.
Karsto is one of the facilities that will be completely shut down during maintenance, and the giant Troll gas field, supervised by the Norwegian National Oil Company, will also reduce production. In the next three weeks, Norway's daily natural gas production will decrease by 0.12 billion cubic meters, about one-third of the usual flow sent to Europe.
Gisle Ledel Johannessen, spokesperson for the Norwegian National Oil Company, said, "We have assessed the risks to ensure that production losses are minimized as much as possible. The level of maintenance and inspection activities this autumn is fairly normal, and we are well prepared."
On the bright side, Europe's gas storage levels are more abundant than in previous years, reaching the critical threshold of 90% two months ahead of schedule. Europe has also rapidly expanded its renewable energy capacity and built liquefied natural gas infrastructure to import fuel from other places.
Nevertheless, Europe still has a few more weeks until the official start of the heating season, when demand usually increases, and it also faces fierce competition for liquefied natural gas from Asia and other regions. If problems arise, this could lead to price increases for the industry and consumers.
Hansen of Gassco said, "When accidents happen, challenges arise. It is very difficult to be prepared for everything."