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* UK at risk of price spike as Norway's exports are reduced

* Continental Europe to take more gas from Russia

* UK spot prices could rise above Russian oil-linked contracts

By Nerijus Adomaitis

OSLO, Sept 30 (Reuters) - Britain faces a tight winter gas season as it relies heavily on struggling Norwegian supplies and has few alternatives to source cheap gas elsewhere.

Britain already relies heavily on Norwegian imports to meet its needs and analysts say this dependency is set to rise as Russian gas will mainly go to continental Europe, while shipments of overseas liquefied natural gas (LNG) will mostly head to Asia, where customers pay more for gas.

The new gas year starts on October 1, when European gas buyers and sellers adjust supply volumes ahead of the peak demand winter heating season.

But Norway's biggest gas field Troll, which accounts for around 35 percent of its gas production, has had its capacity reduced for much of this year, and its operator says supplies will be limited until 2014.

"We expect to see somewhat reduced capacity into the winter at the Troll field due to technical issues at Troll A," said Morten Eek of the field's operator Statoil, adding that its remaining capacity would still allow the company to "more or less" meet production quotas.

Norway's gas system operator Gassco said production capacity would be reduced by 34 million cubic metres per day until September 2014, compared with a capacity of up to 120 mcm of gas per day before the outage.

Norway exported 103.8 billion cubic metres (bcm) of pipeline gas in the 2012/2013 gas year, which ended on September 30, including 29.8 bcm to the UK, up from 25 bcm during the previous gas year of 2011/2012.

For the first eight months of 2013, Norwegian exports to Europe fell four percent to 68.6 bcm from 71.3 bcm during the same period in 2012.

"Norway normally produces gas at full capacity during the coldest months, and Troll's outage leaves no flexibility to ramp-up production to meet peak demand in case both the UK and continental Europe freeze," said Anette Einarsen, an Oslo-based gas analyst at Thomson Reuters Point Carbon.

News about Norway's gas outage extending throughout the winter has forced British gas traders to buy more forward contracts in order to hedge against any further supply disruptions from Britain's key gas supplier.

LOW FLEXIBILITY

Should Norwegian supplies not meet demand in case of a cold British winter, UK customers could begin importing gas from continental Europe, which receives most of its gas from Russia.

But analysts say such a switch would come at a high cost, forcing British customers to pay above Russian oil-indexed gas prices to attract flows from continental Europe.

Point Carbon estimates Russian oil-indexed price at 74-78 pence per therm, compared with current UK spot prices of under 65 pence and average winter prices of below 70 pence per therm.

Russia sells most of its gas under long-term contracts linked to the price of oil, while Norway has switched increasingly to a pricing model based on gas spot markets such as Britain's National Balancing Point (NBP).

Oil prices have been relatively high as a result of booming demand outside Europe and as a result of political unrest in North Africa and the Middle East, while European spot gas prices have been low because of Europe's sluggish economy.

This means that Russian oil-linked gas prices have been more expensive than Norwegian spot supplies.

To regain competitiveness, Russia's gas export monopolist Gazprom has handed out price rebates worth billions of euros over the past year, bringing its contracts closer to the spot market, and analysts say this will increase Russia's gas market share.

"We expect the continent to take more Russian gas and less Norwegian gas, if we have a normal winter, during the next gas year," said Einarsen.

Russian preliminary gas exports to Europe rose by 14 percent to 105.2 bcm during January-August, and its gas monopoly Gazprom plans to restore supplies to Europe to 152 bcm this year after they fell 8 percent to 139 bcm in 2012.

Alternatively Britain could get gas through shipped supplies of liquefied natural gas (LNG) from suppliers such as Qatar.

But LNG prices are high as its biggest buyers, Japan and South Korea, pay far more for cargoes than European buyers.

Asian spot prices for LNG cargoes are around $15.5 per million British thermal units (mmBtu), equivalent to 155 pence per therm, and analysts say British spot gas prices would have to rise closer to this level in order to convince LNG exporters to sell cargoes to Europe instead of Asia.

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