According to a BofA Global Research report sent to Rigzone recently, Norway is now Europe’s number one gas supplier.
Norway supplies around 50 percent of Europe’s domestic gas volumes which equates to around 25 percent of the continent’s total gas consumption, the report outlined. The report highlighted that Norway’s contribution is “even starker considering that virtually 100 percent of this is exported for Europe’s wider benefit, while other major producers, such as the UK, are still net consumers”.
“With Russian gas imports already down sharply (35 percent) across 1H22, Norway is comfortably Europe’s #1 gas supplier,” the BofA Global Research report stated.
“We see a reliable partner too, with broad cross-party government support providing the industry a clear ‘licence to operate’. We think well evidenced via recent tax changes that improve project economics … whilst European peers have inversely enacted windfall taxes,” the report added.
“The EU have indeed ‘agreed to step up cooperation in order to ensure additional short-term and long-term gas supplies from Norway’,” the report continued.
In the report, BofA Global Research outlined that Europe’s call on gas imports has risen since 2015 due to domestic declines outside of Norway as well as increasing gas consumption on the continent since then.
“We forecast a further 25 billion cubic meters of production declines from 2022-25 which will only serve to increase import reliance,” the BofA Global Research note stated.
European Gas Situation Moves from Bad to Ugly
A separate BofA Global Research report sent to Rigzone on Monday noted that the European gas situation is quickly moving from the company’s “bad (105 EUR/MWh)” to its “ugly (200 EUR/MWh) scenario”.
“With Nord Stream 1 pipeline flows at 20 percent of capacity, storage builds into winter could be insufficient and the EU is now planning for widespread demand rationing,” the report stated.
“How did this happen? Just when Europe thought it had met Russia’s requirements for restoring operations, a new technical hang-up emerged, undercutting any optimism felt by the market,” the report added.
“Inadequate paperwork for the recently maintained NS1 gas turbine is the most recent in a laundry list of issues Russia has presented as reasons not to flow gas. As pessimism on Russian supplies grows, European natgas spot and forward prices are settling into a higher range,” the report continued.
BofA Global Research also warned in the report that Nord Stream 1 (NS1) will need to operate back at 40 percent to push NWE storage levels near the five-year average to start winter.
“If Russia cuts NS1 to zero again, gas inventories would likely struggle to reach the 2021 highs, and storage at season end could fall to perilously low levels,” the report stated.
Nord Stream 1 Drops to Nil
In a report sent to Rigzone on July 14, BofA Global research highlighted that Nord Stream 1 gas flows dropped to nil on annual maintenance.
“At nil flows, we estimate Europe’s gas inventories run ‘dry’ by year-end,” BofA Global research stated in the report.
“We believe such a scenario can only be solved by more demand destruction. The scale? Nord Stream supplies 10 percent of Europe’s annual gas demand. Assuming industrial demand takes the brunt of such a hit, this would put one third of all industrial consumption at risk,” the report added.
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