European countries are raising gas output again to cut dependence on Russian imports and contribute to the bloc's security of supply, writes Florence Schmit
Domestic EU gas production has been in long-term decline, but the bloc's quest to wean itself off Russian hydrocarbons has reignited some members' ambitions of ensuring security of supply through raising domestic gas output.
Gas production in the EU has dropped consistently on an annual basis since 2013. Production was just over 45.9bn m³ in 2022, a drop of more than 8.5pc on the year, according to latest data from EU statistics office Eurostat.
Production from the Netherlands, the EU's single-largest domestic gas producer, fell by more than 17pc on the year in 2022, driving the bloc's overall decline. Output also dropped strongly in Germany and Poland (see chart).
The Netherlands is on track to lose more of its share of total EU output this year, after operations at the Groningen field stop at the beginning of October. Output from the field was already limited to 2.8bn m³ in the 2022-23 gas year. Production from smaller fields in the Dutch part of the North Sea also fell last year, to 11.3bn m³ from 13.2bn m³ in 2021.
Overall European gas output may have continued to slip this year. Dutch small fields produced 4.14bn m³ in January-May, down from 5.2bn m³ a year earlier, the most recent figures available show. Shell's European gas production fell to 4.69bn m³ in January-June, from 6.65bn m³ a year earlier, probably as a result of lower output in the Netherlands more than offsetting stronger production from Shell's Norwegian assets. Italian energy firm Eni's European gas output retreated to 3.12bn m³ from 3.51bn m³ over the same period, including a drop to 1.12bn m³ from 1.25bn m³ in production from its Italian assets. German upstream firm Wintershall Dea reported lower European gas output in the second quarter, which almost entirely offset the stronger output in January-March.
A turning point?
The decline in Russian gas imports since the outbreak of the war in Ukraine — having dropped to about 13pc by November 2022, from about half of all EU imports in mid-2021 — has prompted governments in the bloc to secure alternative supplies, with some being close to raising domestic production.
Danish gas production declined on the year in 2022, to about 1.65bn m³, but it could rise again as early as next year once the redeveloped Tyra field comes back on line. Operator TotalEnergies expects output from the field to reach 2.8bn m³/yr. The country's output nearly halved in 2020 from a year earlier after the field went off line for redevelopment in September 2019.
The field's redevelopment started before the war but Denmark's ambition to raise output further to "contribute to Europe's security of supply" could become a reality if a licence for the Elly-Luke concession in the North Sea is granted, the Danish climate and energy ministry said in April. "The Ukraine war has shown that Europe's energy supply is fragile," climate, energy and utilities minister Lars Aagaard says. "And I would rather see that gas come from efficient production in the North Sea rather than from outside the EU." The Danish Energy Agency estimates the volume of gas from the concession at 5.2bn m³/yr.
The Italian government last year expressed its ambition to raise domestic gas production in a bid to cut its dependence on Russian imports. Italian gas production totalled about 3.36bn m³ in 2022, down by nearly 2.5pc compared with a year earlier, Eurostat data show. But the country's output could double by as early as 2025, through optimising production at existing fields as well as accelerating the development of new projects already licensed, according to estimates by Assorisorse, the mineral and energy resources branch of Italian industrial association Confindustria.
The Dutch government has repeatedly expressed interest in further developing small fields in its portion of the North Sea, with the potential for maximum achievable output at just over 15bn m³/yr in 2026, Dutch state secretary for mining Hans Vijlbrief said in June. But the collapse of the Dutch coalition government last month could slow any decisions regarding additional North Sea gas extraction.
Looking further ahead, the recent approval of the Neptun Deep gas project in the Black Sea could boost gas production from Romania, which fell slightly in 2022 compared with a year earlier, according to data from the national statistics office. First gas from the project is targeted for 2027 and production should plateau at 8bn m³/yr for almost 10 years. This would nearly double Romania's gas output and make the country the EU's largest gas producer and a net exporter, operator OMV Petrom says. The project would allow the country to "become an energy hub and an exporter of regional energy security", the Romanian energy ministry said in September, while then-prime minister Nicolae Ciuca called it a "viable option to ensure the green transition and a vital resource for balancing the electricity grid".
And Austrian utility OMV has announced the discovery of new gas field in the country — Wittau Tief-2a — which holds potential recoverable reserves of approximately 48TWh (4bn m³). This could increase OMV's gas production in Austria by 50pc, the firm says.
North Sea dominance unrivalled
As Russian supplies and domestic production dwindle, the importance of North Sea gas to EU security of supply has increased, but production is not expected to ramp up significantly in the short term.
Norway will "contribute to energy security in Europe for many years into the future", Norwegian Petroleum Directorate (NPD) director general Torgeir Stordal says. "If we want to maintain our role as a significant supplier over the longer term, we must continue to invest in the [continental] shelf, both in the further development of fields, development of discoveries and exploration of new resources." Output from the Norwegian offshore rose by 8pc on the year to about 122bn m³ in 2022, according to data from NPD. Output is expected to hold at this level for the next 4-5 years, but it could rise in the latter half of this decade following the recent approval of 19 new offshore oil and gas projects, NPD says.
UK gas production rose by about 14pc in 2022 from a year earlier to roughly 35.5bn m³. And prime minister Rishi Sunak has committed to granting "hundreds of new oil and gas licences" in a bid to "slow the rapid decline in domestic production of oil and gas" and reduce the country's "reliance on hostile states". The government plans to award as many as 100 licences this autumn as part of UK oil and gas industry regulator NSTA's 33rd offshore oil and gas licensing round, which has attracted 115 bids from 76 companies for 258 of the 931 blocks offered, the regulator reported in January. The UK government is also planning to review its fiscal regime for the oil and gas sector in order to provide "predictability and certainty" to support investment and protect jobs.
The move has been criticised by environmental groups pushing for increased energy efficiency and a more rapid deployment of renewable resources. But a quarter of the country's energy needs will still come from oil and gas even once it reaches "net zero" by 2050, the government says, adding that domestically produced gas has a lower carbon intensity than imported LNG. The average intensity of LNG imports is 79kg CO2/bl of oil equivalent (boe) — with Norwegian LNG being the least carbon intensive, at 33kg CO2/boe — compared with just 21kg CO2/boe for UK-produced gas, NTSA estimates.
