Oil glut to worsen as INEOS postpones Forties pipeline shutdown

netherlands 1707392 640UK operator INEOS has decided to postpone its scheduled maintenance for the North Sea Forties pipeline system (FPS) in a move that Rystad Energy calculates will add several hundred thousands of extra barrels to the market every day

Based on this development, Rystad Energy has raised its North Sea oil production forecast by 330,000 bpd to 2.96 million bpd for June 2020 and by 190,000 bpd to 3.04 million bpd for July 2020.

“This just adds another ripple to the growing oversupply pool of global liquids – an overhang for 2Q20 that is already so incomprehensibly massive that it will eventually force shut-ins as oil prices fall below short-run marginal costs and logistical challenges arise,” said Rystad Energy oil market analyst Milan Rudel.

E&P companies are trying to keep oil flowing during the coronavirus outbreak while cutting back on all other activities – including maintenance. Turnarounds increase human-to-human contact adding maintenance crews typically results in more people working at the platform and more rotation.

“Given the current struggle, E&Ps are understandably trying to mitigate the coronavirus risk by implementing their version of social distancing,” added Rudel.

Although INEOS has not yet officially decided on a new date for the FPS maintenance, except stating that it is postponed until August 2020 at the earliest, Rystad sees a case for delaying the turnaround to 2021. Rystad has incorporated a two-month delay to mid-August 2020 in its base case.

The FPS carries oil from UK and Norwegian fields in the central North Sea to Cruden Bay in Scotland. In addition, Rystad also expect maintenance of the Scottish Area Gas Evacuation (SAGE) pipeline to be delayed in line with FPS maintenance, as several fields connected to FPS feed gas into the SAGE system. Thus, Rystad also revise its maintenance forecast for Grane (Edvard Grieg and Ivar Aasen), Alvheim, Flotta (Golden Eagle), Beryl and Gryphon crude streams accordingly.

Alain Charles Publishing, University House, 11-13 Lower Grosvenor Place, London, SW1W 0EX, UK
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