European domestic supply options on the decline; looks to liquefied natural gas for winter supply security
| Date | 01 November 2019 |
| Published date | 01 November 2019 |
| DOI | http://doi.org/10.1111/oet.12741 |
GAS AND POWER
European domestic supply options on the decline; looks
to liquefied natural gas for winter supply security
While European gas prices are at their lowest level for
many years, a decline of domestic production and flexi-
bility means there are still supply side risks this winter,
with much depending on continued cheap liquefied natu-
ral gas (LNG) to meet any shortfall. In the United King-
dom, storage is at historically low levels, while Denmark
is ceasing production at its major offshore Tyra gas-field
for a 3-year refurbishment. And in the Netherlands, the
giant Groningen field, which has been the mainstay of
regional supply for decades, is being wound down ahead
of schedule due to frequent earth tremors.
Output from Groningen is to be cut to around 12 bcm
for the 2019 to 2020 gas year, down from a recommended
minimum of 12.8 bcm set earlier in the year—which itself
is a big reduction from previous years (see Figure 1). But
even more significant is the government's new plan to halt
Groningen supply completely from 2022, rather than 2030,
as it had previously stated. It is possiblethat it may be kept
as a backup beyond 2022, to meet peak winter demand,
for example, or to offset transit failure through Ukraine—
but it would only be used in emergencies. The decision
will take a significant portion out of remaining European
domestic supply, while demand continues to rise in many
areas, leaving the region ever moreimport dependent.
Dutch demand is around 45 bcm (a high total partly
due to cheap, reliable domestic supply from Groningen),
and without Groningen the country would become
completely reliant on a number of small domestic off-
shore fields, along with imports of LNG and pipeline gas
from Russia or Norway—in a similar way to its continen-
tal neighbors, Germany, Belgium, and France.
The Netherlands could get supply from the United
Kingdom by reversing the Balgzand-Bacton Line pipeline
flow, which normally supplies the United Kingdom with
Dutch gas through the winter, but the United Kingdom's
domestic resources are also on the decline and historic
price differentials would have to reverse to make flow
profitable (UK spot prices are normally slightly above
Dutch prices in the winter).
Groningen also still has supply contracts with Ger-
man and Belgian customers, which are due to be phased
out by 2029. The field's gas is high in nitrogen (low calo-
rie gas), and so replacement supply must also have this
quality in order to meet appliance specifications. This
can be achieved by blending gas in spring and summer
for winter sue in the major 5 bcm Norg storage site,
which, like Groningen, is operated by NAM, a Shell/
ExxonMobil joint venture. In addition, its nine largest
industrial customers have been asked to switch to higher
calorie gas from October 2022.
The reduction at Groningen is due to earth tremors
following many years of heavy production, which have
June 2015
0
5
10
15
BCM
20
25
30
35
August 2015
October 2015
December 2015
February 2016
April 2016
June 2016
August 2016
October 2016
December 2016
April 2017
June 2017
August 2017
Groningen production
October 2017
December 2018
February 2017
April 2019
June 2019
Au
g
ust 2019
February 2019
April 2018
June 2018
August 2018
October 2018
December 2018
February 2018
FIGURE 1 Groningen production
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