Norway's Sleipner Hub Shutdown Halts Gas Exports to Europe, Causing Prices to Surge

On June 2, 2024, an unplanned shutdown of Norway's Sleipner hub halted natural gas exports to Europe, causing natural gas prices to spike to their highest level this year. The shutdown was triggered by a crack discovered in a two-inch pipeline onboard the Sleipner Riser platform.

The shutdown had a significant impact on European gas markets. Benchmark Dutch gas futures surged by 15% to €38.39 per megawatt-hour (MWh), while the UK contract jumped by as much as 15%, the highest increase since October. Norwegian gas supply nominations fell sharply, dropping to 256 million cubic meters (mcm) per day from 300 mcm/day nominated on Friday.

The Nyhamna gas processing plant, operated by Shell, was also affected by the shutdown. The plant, which has a processing capacity of up to 79.8 mcm/day, experienced a real loss of 56.7 mcm on Monday. The Easington terminal in the UK, an entry point for a third of Britain's total gas supply, saw Norwegian flows plunge to zero.

Alfred Hansen, head of pipeline system operations at Gassco, highlighted the severity of the situation, stating, "This has big consequences from a supply perspective." A Gassco spokesperson added, "We are working... with a plan for repairs and with a plan for compensatory measures to deliver the highest possible volume to Europe."

Why this matters: The shutdown of Norway's Sleipner hub highlights the fragility of Europe's energy supply chain and its reliance on gas imports. This incident could lead to prolonged price volatility and energy security concerns for European countries.

The Sleipner Riser platform is a critical connection point for the Langeled North and Langeled South pipelines, which link the Nyhamna plant on Norway's west coast with the Easington terminal in northeast England. The shutdown has interrupted these key supply lines, exacerbating the supply crunch in Europe.

Norway has been Europe's biggest supplier of natural gas since 2022, after Russia's invasion of Ukraine severed long-standing energy ties with Europe. The current outage highlights the region's growing dependency on Norwegian gas and the vulnerability of its energy supply infrastructure.

The timeline for repairing the crack in the pipeline remains uncertain. Gassco and Equinor, the operator of the Sleipner platform, are investigating the issue and working on a solution. However, bypassing the Sleipner hub is a complex and time-consuming process, adding to the uncertainty.

The surge in gas prices is further compounded by recent declines in LNG imports to Europe, driven by higher demand in Asia sparked by a heat wave. Disruptions at global LNG facilities have also contributed to the bullish market sentiment.

To recap, the shutdown of Norway's Sleipner hub has caused a significant disruption in natural gas exports to Europe, leading to a surge in prices. The incident highlights the fragility of Europe's energy supply chain and its reliance on imports.

Key Takeaways

• Norway's Sleipner hub shutdown halts natural gas exports to Europe.
• Gas prices surge to highest level this year, up 15% in the Netherlands and UK.
• Nyhamna gas processing plant and Easington terminal affected, reducing supply.
• Shutdown highlights Europe's reliance on gas imports and energy supply fragility.
• Repair timeline uncertain, exacerbating price volatility and energy security concerns.