Extended Norway gas plant outage lifts British prices

(Adds Gassco comment; updates price changes)

By Nina Chestney

LONDON, July 26 (Reuters) - The extension of an outage at Norway's Kollsnes gas processing plant on Wednesday lifted British gas prices on expectations of tighter supply over the next few months.

Norwegian gas system operator Gassco extended an unplanned outage at Kollsnes until Oct (Shenzhen: 000069.SZ - news) . 1 on Wednesday to repair damage to a piece of equipment, prompting a rally in British wholesale gas prices.

Kollsnes processes gas from the Troll, Kvitebjørn, Visund and Fram fields in Norway and around 40 percent of all Norwegian gas export go via the facility.

The outage, which started July 18, has been extended several times. It reduces Kollsnes' capacity by 9.5 million cubic metres (mcm) a day, out of a total production capacity of more than 140 mcm/day.

Kollsnes is expected to return to full capacity before the winter gas season in Europe starts on Oct. 1, the spokesman said, which is when demand is traditionally higher.

"It is not a small maintenance ... (But) we should be back on track by Oct. 1," he added.

The British gas price for August delivery moved up by nearly 4 percent to 38.40 pence per therm by 1316 GMT on expectations of less abundant supply, traders said.

The September and October contracts also rose by about 5 percent and 3 percent respectively. Gas for immediate delivery rose by more than 5 percent.

The extension coincides with some maintenance outages at gas terminals and fields in the UK Continental Shelf in August and September which will already reduce flows from domestic production.

There are also Norwegian maintenance outages scheduled for September.

The British gas market is already more vulnerable to price spikes and more reliant on gas imports because Britain is set to lose its largest natural gas storage site, Rough, after operator Centrica (Frankfurt: A0DK6K - news) said last month it would close the facility.

"You are likely to see an initial reaction upwards (in price) given the market is jittery with the underlying nature of weaker sterling and reduced storage capacity," said Nick Campbell, risk manager at Inspired Energy (LSE: INSE.L - news) .

"You may even see some non-physical players squeeze the shorts again which should push the price higher. But, given the potential wave of liquefied natural gas and the nature of the outage is corrective and set to end before the main winter weather period then we could see prices fall back," he added.

Britain imports around half of its gas from Norway, continental Europe and Qatar in the form of LNG.

Francois Flament, head of gas research and insight at Thomson Reuters (Dusseldorf: TOC.DU - news) , said the British gas market had looked like it would be oversupplied for the rest of this summer.

"The (Kollsnes) extension will decrease such risk and it's now less likely that (British gas) prices will disconnect from continental hubs in the future, as they did earlier this month," he added.

The British day-ahead gas price fell below the Dutch front-month price at the TTF hub in June when the InterconnectorUK export pipeline underwent maintenance.

(Additional reporting by Susanna Twidale in London and Nerijus Adomaitis in Oslo; Editing by Edmund Blair and Louise Heavens)