Norwegian state-controlled oil company Equinor has stopped natural gas injection used for enhanced oil production at a North Sea field so it can instead focus on increasing its natural gas exports to Europe.
The move is unusual for Norway, where authorities for decades have demanded that gas production should not be prioritised over oil production.
It is easier to extract natural gas in a low-pressure reservoir than the heavier crude oil, but the government had preferred that associated gas extracted from a field should be re-injected in order to maintain pressure that improved oil recovery.
Yet as European natural gas demand has strengthened with economic activity picking up after coronavirus lockdowns, European gas supplies have tightened and prices have soared.
Opening every valve
Given the European natural gas supply crunch, Equinor has opened every valve to increase gas exports to Europe, in the words of chief executive Anders Opedal, who addressed an Oslo press conference on Wednesday, to coincide with the third quarter earnings report.
“At the Gina Krogh field, we have temporarily stopped gas injection for increased oil production in order to increase gas production,” Opedal said.
The measure will reduce total oil production from the field but due to high natural gas prices, the action will create more overall value, Opedal explained.
"Equinor has an important role as a reliable energy provider to Europe, and we have taken steps to increase our gas exports to respond to the high demand," he said.
“We have made thorough calculations, and we believe this temporary measure will create the most value,” Opedal said.
Sources in Norway’s petroleum authorities told Upstream that Norway usually does not allow crude oil to be left in the ground in order to increase natural gas production long term.
However, they said the unusually high gas prices have changed the socioeconomic value of the current oil and gas production ratios.
Russia is another key supplier of gas exports to Europe. When asked if he believes Russia is holding back Russian gas exports to Europe intentionally, Opedal replied that he has no more data than the gas export volumes Russia is announcing on a monthly basis.
Gas prices power strong Equinor results
The exceptionally high European natural gas prices and rising oil prices helped to power Equinor on Wednesday to release its best quarterly results since 2012.
Equinor’s adjusted earnings before tax rose to $9.77 billion in the July to September quarter from $780 million a year ago, exceeding the $8.4 billion predicted in a poll of 25 analysts compiled by Equinor.
"The current unprecedented level and volatility in European gas prices underlines the uncertainty in the market," Opedal said.
Global gas prices rose sharply in the third quarter due to rising demand, below-average storage levels and concerns over Russian supply ahead of the winter heating season.
High natural gas prices have also led to soaring electricity prices across much of Europe and the world, hitting households as well as companies – some of which have been forced to shut factories as profits eroded, triggering more supply chain shortages.
Equinor plans to buy back shares worth $1 billion during the next three months, up from its previous plan to purchase $300 million worth of shares.
During the previous three months, the company had also planned to buy up to $300 million worth of shares, but ended up spending just $99 million.
Equinor revised its capital spending for 2021 downward to $8 billion from a range of $9 billion to $10 billion seen previously.
The average for 2021 and 2022 will still be between $9 billion and $10 billion, however.
It kept its plans to spend around $12 billion per year in 2023 and 2024.
(Reuters contributed to this article.)