Thursday, July 27, 2017

Statoil to Close Mongstad Power Plant from 2019

Posted by February 15, 2017

Statoil will shut down its loss-making Mongstad gas-fired heat and power plant in Norway from the start of 2019, it said on Wednesday, as Nordic power prices are set to remain low for a decade.

The 270-megawatt (MW) capacity plant supplies power and heat to Statoil (STO)'s nearby Mongstad refinery, the biggest in the country. The refinery can also get power from the national grid.

The plant will be closed as its agreement to purchase gas from the Troll field will be terminated at the end of 2018, Statoil said in a statement to the Nordic power exchange Nord Pool.

"This means that the plant will be phased out due to several years of unprofitable operations," Statoil spokeswoman Elin Isaksen said.

Isaksen said the company will look for alternative sources to supply power and heat to its 240,000 barrels per day refinery.

"We will find alternative sources for power and heat by the end of 2018. (The) closure will not have an impact on the refinery's operations," Isaksen added.

Ole Tom Djupskaas, a Nordic power market analyst at Thomson Reuters, said Statoil's move showed the company didn't have much hope for gas power becoming profitable in the future.

"The large increase in renewables in the Nordic power system is leading to expectations of lower prices ahead," he added.

Nordic power prices fell to a 15-year low of 21 euros per megawatt-hour (MWh) in 2015, and the forward curve showed prices not rising above 30 euros/MWh until 2027, well below the levels needed to make it profitable to generate power from gas.

The Mongstad power plant, built by Danish firm Dong Energy, started operations in 2010. Three years later Dong sold it to Statoil for 1.8 billion Norwegian crowns ($214.67 million).

Norway, Western Europe's top gas supplier, generates more than 95 percent of its electricity from hydropower plants, and last year approved plans to build Europe's largest onshore wind farm by 2020.
 
Reporting by Nerijus Adomaitis

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