Last year, total Norwegian exports to Europe dropped from 340mcm per day in March to 325mcm per day in April. However, historically the UK has shouldered more of this reduction than other countries. In April 2016, exports to the UK dropped an average of 17mcm/day, while flows to Germany rose by 8mcm/day and deliveries to France and Belgium were little changed.
The UK gas market is anticipating a fall in imports from Norway next week. However, the extent of the reduction is dependent on various factors, most importantly the state of the country’s storage reserves.
Back in 2014, gas inventories at the Rough storage site were significantly higher than in previous years, at around 50% of capacity. The reduced injection demand for the upcoming summer and healthy gas supply situation in the UK meant the requirement for Norwegian exports was less and flows dropped by over 40mcm per day.
Maintenance issues also impact on export flows to Europe. In 2015, exports to Germany, France and Belgium fell at a similar rate to the UK. This was a result of heavy maintenance on the Norwegian Continental Shelf during April of that year. Total Norwegian exports overall fell from 330mcm/day to around 240mcm/day – a reduction of over 25%. As a result of the lower overall Norwegian production, all the European countries took an equitable hit in exports.
What about this year?
This year, the problems with the Rough storage facility have been well documented. Inventories have fallen below the lows from the previous year and maintenance work is due to continue until at least July, during which time no injection availability is possible. This could lead to a larger than average reduction in exports to the UK, with Britain unable to use Norwegian supplies to build up long-range storage stocks as it had done in previous years. Furthermore, the lack of supply flexibility in the UK during the 2016/17 winter season, as a result of reduced Rough stocks, had led to higher than average Norwegian exports to the UK. During this time, Norwegian exports to the UK averaged 125mcm per day. This was a 25% increase on the average 100mcm per day seen during the previous winter.
The reduction in Norwegian supply to the UK could generate volatility in the UK gas market during the early parts of April as the UK adjusts to a different supply mix.
The Utilitywise Market Intelligence team will be abreast of all developments during the winter-summer switch.