Equinor targets return to ‘high production’ to ward off winter gas crisis

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The boss of Norway’s state-backed energy company has said European gas supplies are “in a much better place” compared with last year, adding that repairs to its platforms will not interrupt supplies this winter.

Equinor, which has become Europe’s biggest source of natural gas after Russia halted most of its gas supplies to the continent following its invasion of Ukraine, on Friday lowered its outlook for annual production growth from 3 per cent to 1.5 per cent because of maintenance on its gas and oilfields during the summer.

But Anders Opedal, the company’s chief executive, said the work had now been completed, enabling production to ramp up ahead of the crucial winter heating season.

“We’re back in normal production,” he added. “We don’t see any read-over from this event on supplies. Our focus will be to make sure we have high production at our facilities.”

The comments should provide a degree of reassurance to gas markets, where prices have jumped in recent months due to nervousness about the war between Israel and Hamas, strikes at a Chevron liquefied natural gas plant in Australia and possible sabotage of a gas pipeline between Finland and Estonia.

Futures contracts tracking Dutch gas, the benchmark for global gas prices traded at €51.24 per megawatt hour on Friday, well below the peak of €311 reached in August 2022 after Russia invaded Ukraine but double the recent low of €25 at the end of July.

“It’s a nervous market. Incidents and events around the world do impact the European gas market and we expect volatility but Europe is in a much better place [than last winter],” Opedal said.

While Equinor, which provides 29 per cent of the UK’s natural gas, will continue to boost supplies, Opedal said Europe remained a “scarce market”. “We will produce as much gas as possible but Europe also has to attract liquefied natural gas into the market,” he added.

To bolster energy security, countries have struck long-term deals for LNG, with companies in France, the Netherlands and Italy all announcing deals this month with Qatar to guarantee 27 years of supply.

Europe has also topped up gas storage, with the EU reaching a target of filling storage facilities to 90 per cent of capacity in August, two-and-a-half months ahead of a November deadline.

Still, analysts warn that Europe is not completely out of the woods, with gas storage alone not sufficient to meet winter demand. Europe “remains finely balanced for this winter” and any unplanned large outage at a key piece of infrastructure or supply disruption “would test the gas system’s resilience”, said Natasha Fielding, head of European gas pricing at Argus, a price reporting agency.

“If something happened to rapidly tighten the global LNG market, such as a shutdown at a large LNG export plant, and both Europe and Asia got into a tug of war for available LNG supplies, then European gas prices could spike again,” she added.

Francesco Gattei, chief financial officer of Italian energy company Eni, said he had been “quite positively surprised” by the company’s ability to quickly wean itself off Russian gas. Eni also reported results on Friday, saying its adjusted profit before taxation fell 47 per cent to €3.3bn in the three months to 30 September, beating analysts’ estimates.

Equinor’s net operating income before taxation was $7.5bn in the third quarter, down 71 per cent from $26.1bn in the same period last year, and slightly below the $9.6bn reported in 2021, also ahead of analysts’ forecasts.

Both Eni and Equinor expect prices to remain higher than before the Ukraine war for some time, bolstering profits in the years ahead but increasing scrutiny of the industry, which has faced a series of windfall taxes.

Additional reporting by Shotaro Tani