European gas prices steady despite increase in LNG supply
OSLO, May 25 (Reuters) – Norway’s Statoil does not expect European gas prices to fall much further as rising demand from the power generation sector would offset an expected increase in liquefied natural gas (LNG) supply, company officials said on Wednesday.
The majority state-owned Statoil, Europe’s second largest gas supplier after Russia’s Gazprom, sold a record 85 billion cubic metres (bcm) of gas in 2015.
LNG supply to Europe is expected to rise as new liquefaction plants in the U.S. and Australia ramp up production.
“LNG could potentially put pressure on prices, but then the demand will kick in and balance this,” Olav Kolbeinstveit, Vice President, Market Analysis, told Reuters.
“In the short-term there can be some pressure, but over time prices can’t fall much more lower than they are now,” he added.
British gas prices for next-winter delivery fell by around 50 percent from 2014 to near 30 pence per therm in April, before recovering slightly to about 36 pence per therm currently.
Demand for gas in the power generation sector has already risen in Britain, one of Statoil’s top markets, as the fuel has become comparatively cheaper than coal. A similar trend is expected in continental Europe.
Tor Martin Anfinnsen, Statoil’s Senior Vice President, Marketing and Trading, said he did not see an increase in LNG supplies to Europe triggering a price war as some analysts have suggested.
“First Norwegian, Russian, Algerian and domestically produced gas will go to Europe, because it’s competitive, and the remaining gap will be filled by LNG,” Anfinnsen told Reuters. “If the gap is big, prices will have to rise to attract more LNG.”
Russia’s Gazprom, which supplies about a third of total gas in the European Union, has also said it did not see a need for a price war.
Anfinnsen said Statoil was well positioned to compete for European Union market share, also with Russian gas, because it offered competitive prices and was much closer to the market.
Norway exports most of its gas via an offshore pipeline system in the North Sea to receiving terminals in Britain, Germany, Belgium and France.
Its pipeline gas exports hit a record 108 billion cubic metres last year, with Statoil marketing about 70-80 percent of total sales, which also includes gas owned by the state.
“We can’t supply at lot more… We are roughly at a peak,” Anfinnsen said.
(Reporting by Nerijus Adomaitis; Editing by Alexandra Hudson)