Doubts about output levels from the Buzzard oil field in the UK North Sea -- the biggest contributor to the Forties stream -- have resurfaced after a series of glitches in recent weeks, which come after a year in which the field has produced at below-normal levels. The field, which is one of the largest in the North Sea with a nominal output of 220,000 b/d, is key to the price of the Dated Brent physical oil benchmark. The recent production hiccups -- production has been disrupted on three separate occasions in the last three weeks, according to traders -- has caused Forties output to fall and helped to keep the backwardation of the ICE Brent futures curve firm.
"I was starting to feel Buzzard was secure... but these new issues have reminded everyone of the previous problems with it... it keeps them at the back of our minds," said a trader. "It seems the field can't get running... it's a constant source of uncertainty," said another.
The first outage was on October 27-29, when the Netherley pumping station -- one of the three pumps on the Forties pipeline -- failed, forcing Buzzard to reduce output. The glitch was resolved October 29 and caused only minor falls in Forties volumes, said traders at the time.
A few days later, on November 7, output fell to almost zero for an unknown reason, before recovering to 210,000 b/d by November 11, according to traders with access to data on the field. Finally, production fell again last weekend and on Monday due to electrical problems on a platform, according to traders.
Output was said to be zero between Monday and Wednesday, and to have recovered to around 80,000-100,000 b/d Thursday and Friday. Nexen, the field operator, confirmed the latest outage Thursday and said production had already restarted at the field, although it declined to comment on production volumes.
While the first outage was not linked to operations at the Buzzard field, trading sources said the second and third likely were. Output from the Buzzard field has been erratic all year due to a faulty cooling system in the spring, and the commissioning of a new platform in late summer. While the faulty cooling system was fixed during the summer, delays associated with the new platform meant production stayed below capacity until the end of September, said traders.
Output had seemed to stabilize in October before the latest issues. Traders said the recent outages meant North Sea crude supply was difficult to assess and were a source of uncertainty to Brent crude prices. They also said that the latest outages may have reinforced the recent fall in Forties crude premiums, as Northwest European refiners prefer to buy other grades with a more stable production program.
Other traders are far less worried by the issues, however. "I'm not overly concerned about the rest of the year... production is better overall than it was this summer," said one. Nexen said output is expected to remain variable in the fourth quarter as it finalizes the commissioning of a new platform.
The Forties crude production program for November has seen fewer changes to loading dates than any other program since September 2009, according to data from Platts. But the schedule for December has already been altered because of the latest outages, with six deferrals so far and one cancellation.
"It looks like they're assuming 200,000 b/d of Buzzard production and we know that can be a moving target," commented a trader.
The backwardation of the ICE Brent curve has fallen significantly this week due to the restart of production in Libya and poor light end cracks for Northwest European refineries. The Buzzard production issues were said to have given additional momentum to the backwardation, but were not enough to prevent crude premiums from falling because of the availability of other crudes, according to traders.