By News Desk
London: Norway’s Equinor is temporarily shutting down three oil and gasfields after workers went on strike, intensifying regional supply troubles and pushing European gas prices to a four-month high.
The strikes that began on Monday evening will affect 89,000 barrels of oil equivalent a day of production at fields on Norway’s continental shelf.
The trade union is threatening more disruptive action in the coming days, which the Norwegian Oil and Gas Association has warned could cut the country’s daily gas exports by 13 percent.
The latest disruption comes at a time when Europe has turned to Norway, traditionally its second biggest gas supplier, to plug the gap left after Moscow cut flows after its invasion of Ukraine earlier this year.
The supply drought has sent European gas prices surging, contributing to a sharp rise in costs for businesses and households and weighing on the region’s economy.
In recent years, Norway has supplied between 20 to 25 percent of gas demand in Europe including the UK, according to Norwegian Petroleum.
Benchmark front-month futures contracts tied to TTF, the European wholesale gas price, jumped 8 percent on Tuesday to €175 per megawatt hour.
That is its highest level since early March and five times the level of a year ago.
Meanwhile, electricity prices in the region have hit their highest sustained level on record, with maintenance problems at French nuclear power plants exacerbating an increase caused by the elevated gas prices.
Germany’s government drew up a law on Monday to take stakes in power companies that are suffering from the skyrocketing cost of imported gas in a sign of the crisis engulfing the European energy industry.
Norway’s Lederne union for oil workers said that its members would extend the strike to three more production sites — Heidrun, Kristin and Aasta Hansteen — from Tuesday, meaning that the disruption is likely to grow by 333,000 boe per day, of which 264,000 boe per day is natural gas.
The dispute centres around workers demanding wage increases to compensate for rising inflation, in part caused by surging commodity prices in the wake of Russia’s invasion of Ukraine.
The union is threatening another escalation of the strikes on Saturday at three more oilfields should no resolution be found.
Traders are becoming increasingly pessimistic that Moscow will resume the flow of gas through Nord Steam 1, the pipeline between northwestern Russia and northern Germany, to full tilt once it comes back from scheduled maintenance, which is scheduled to start next week for 10 days.
State-backed Gazprom last month cut capacity by 60 percent on the line, blaming technical issues linked to western sanctions, but has declined to utilise alternative pipeline routes to maintain supplies.
Many European officials have accused Russia of weaponising gas supplies and warned the continent needs to brace for further cuts.
Goldman Sachs raised its forecast for TTF as it “no longer sees” a full restoration of gas flows from the Nord Stream 1 pipeline as the most probable scenario. It now sees TTF prices for €153 per MWh for the third quarter and €121 per MWh for the fourth quarter this year, up from €104 and €105 per MWh respectively.
Besides bringing in Norwegian supplies, Europe has been importing record volumes of liquefied natural gas, largely from the US, to build up gas storage supplies ahead of winter.
The International Energy Agency said in its quarterly gas market report that the continent’s surging demand for LNG to replace Russian pipeline supplies has rippled around the world and led to an “exceptionally tight” global market.
“Record high European gas prices have turned the continent into a premium market for LNG, drawing deliveries from other regions, and resulting in supply tensions and demand destruction in several markets.”
It warned that Europe’s LNG needs “are expected to outpace supply capacity additions in 2022”. Globally, the IEA now expects gas demand to decline 0.5 per cent this year and remain “subdued” until 2025 owing to higher prices, a sharp reversal of the pre-crisis trend when gas consumption was rising strongly and often replacing coal in power generation. —News Desk
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