Statoil expects higher gas demand in UK, Germany in 2016

OSLO (Reuters) - Demand for natural gas is expected to grow further in Europe this year, particularly in Britain and Germany, the head of marketing for Norwegian oil and gas firm Statoil STL.OL said, as countries seek to reduce carbon emissions.

The headquarters of Norwegian energy firm Statoil is seen outside Oslo, Norway July 25, 2014. REUTERS/Heiko Junge/NTB Scanpix

European gas industry association Eurogas said last October it expected European Union gas demand to have risen by 7 percent for the whole of 2015, after a 9 percent rise in the first six months.

European spot gas prices fell by 30 percent last year due to more supply and their price link to oil, which has fallen around 70 percent since mid-2014.

Statoil’s Tor Martin Anfinnsen said increased demand on the continent would support the gas market.

“What you see in the UK now is a clear trend there at least for a swing up,” Anfinnsen told Reuters in an interview.

“Similarly, although not to the same extent, we believe, based on the government signals in Germany, that there is a potential for a swing up there as well in their strive towards reaching the emission levels.”

Germany has set a goal of cutting greenhouse gas emissions by 40 percent by 2020 compared with 1990 levels, and by 80-95 percent by 2050. Gas-powered electricity plants emit about 50 percent than coal.

France’s plans to reduce reliance on nuclear energy could also mean more demand for gas in addition to a higher share of renewables, Anfinnsen said.

Despite increased demand, Anfinnsen said Statoil expected its gas sales to be steady in 2016 compared with last year.

“We are roughly on the plateau level. This year will not be significantly different from the last year,” he said.

Europe’s top gas suppliers Russia and Norway both reported higher pipeline gas exports last year, but the market is braced for imports of liquefied natural gas (LNG) from the United States, which could add pressure to prices and sales.

“It is likely that (U.S.) LNG volumes could primarily be heading to Europe,” Anfinnsen said.

The first LNG cargo from Cheniere Energy's LNG.A landmark Sabine Pass terminal in Louisiana, however, will be delayed until later February or March, its subsidiary said last week.

Norwegian exports peaked at a record 108.4 billion cubic metres (bcm) “a result of higher demand from Europe”, the Norwegian Petroleum Department said last week.


Statoil, which markets about 80 percent of gas to Europe at prices linked to spot prices on the European gas hubs, such as British NBP and Dutch TTF, also plans to move away from oil-indexation completely.

“We believe that we will be moving closer towards the 100 percent mark through this year,” Anfinnsen said.

Statoil has come under pressure to move away from indexation as buyers want a pricing system that better reflects the market and the higher availability of LNG imports.

Low gas and oil prices weighed on Statoil’s results in the third quarter, when the company posted less than expected operating profit and further cut capital spending.

On Monday oil prices hit the lowest level since 2003 as the market braced for additional Iranian exports after sanctions against the country were lifted over the weekend.[O/R]

“The more supply you add to the mix, all things equal, the lower prices will go and for longer,” Statoil’s Tor Martin Anfinnsen told Reuters.

Asked whether he was worried about new oil supplies coming from Iran, Anfinnsen said: “As a trader I don’t have to be, as a producer, of course, I am.”

($1 = 8.7748 Norwegian crowns)

Additional reporting by Stine Jacobsen; editing by Susan Thomas