Europe

bcm

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Falling UK production is the second source of European production decline (18% of the region’s decrease between 2018 and 2024). Production in other European countries such as Denmark, Germany and Italy is also expected to decline, and to be counterbalanced by production increases in Romania towards the end of the outlook. Norwegian gas production, the largest contributor to European domestic supply, is expected to remain stable to 2024. Given that European natural gas demand is expected to remain stable throughout the forecast period, declining domestic supply will further increase European gas import needs. Another consequence is the loss of some flexibility and timeliness associated with domestic production, which will foster the importance of other sources of supply flexibility such as gas storage, interconnectors and demand-side response.

Norway

Norway accounts for just over half of total European natural gas production and its share is set to increase over the forecast period up to 62%. Norwegian gas output is expected to remain stable whilst gas production in other parts of Europe continues to decline. In 2017 Norwegian natural gas output reached an historical record of 128 bcm. Preliminary data suggest that Norwegian natural gas production decreased by about 1% in 2018 to 126.5 bcm. This figure includes gas used by the energy industry own use (mainly at the well level and on gas processing platforms). Hence, the saleable gas volumes are somewhat lower, amounting to 121.5 bcm last year.

As shown in Figure 2.23, Norwegian saleable natural gas production has risen by over 50% in the last 14 years from 80 bcm in 2004 to a peak of 124 bcm in 2017. Norway’s two giant fields, Troll and Ormen Lange, together accounted for over 50% of the increase between 2004 and 2018. In the first quarter of 2019 Norwegian natural gas production remained stable, increasing slightly by 1% (NPD, 2019b).

Figure 2.23 Saleable gas production by major fields, Norway, 2004–18

Source: NPD (2019a), Saleable Production Report, https://portal.diskos.cgg.com/prod-report-module/.

Norwegian gas production has risen by 3.1% over the past 14 years, with half of the growth coming from two giant fields: Troll and Ormen Lange.

Norwegian natural gas production is set to remain stable through the forecast period. This forecast is aligned with the Norwegian Petroleum Directorate (NPD) projection as of January

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2019, which foresees a slight decline in saleable gas production in 2019 and a recovery between 2020 and 2022 up to a level of 121.4 bcm/y (NPD, 2019c). Depletion from mature fields will be compensated by supply from the development of new fields.

In December 2018 Equinor announced the commercial start-up of the Aasta Hansteen field, which together with the Senfrid Nord field will produce at plateau 8.4 bcm/y. The field is connected via the Polarled pipeline to the Nyhamna processing plant, from where the gas feeds into the Norwegian pipeline system via the Langeled North pipeline (Equinor, 2018a). In addition, the Johan Sverdrup field’s Phase 1 is set to start up in November 2019 (Reuters, 2019c). According to the NPD’s estimates, the field has recoverable gas reserves amounting to 10.24 bcm. The gas will be processed at the Kårstø processing plant, which mainly serves the continental European market (NPD, 2019d). In December 2018 the Norwegian Ministry of Petroleum and Energy approved the plan for development and operation of the Troll Phase 3, which is due to start up in the first half of 2021 and extend the plateau production of Troll by seven years (Equinor, 2018b).

The Netherlands

Dutch gas production has halved over the last 5 years, from over 80 bcm7 in 2013 to less than 40 bcm in 2018. The Netherlands lost its place to the United Kingdom as Europe’s secondlargest producer in 2016 and the country became a net importer of natural gas for the first time in its history in 2018. As shown in Figure 2.24, most of this decrease has been driven by the giant Groningen field, which saw its production falling from 54 bcm in 2013 to less than 19 bcm in 2018.

Figure 2.24 Natural gas production, the Netherlands, 2013–18

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Sources: CBS (2019), Natural Gas Balance Sheet, Supply and Consumption, https://opendata.cbs.nl/statline/#/CBS/en/dataset/84472ENG/table?ts=1554386607207; NAM (2019), “Gasen oliewinning”, www.nam.nl/feiten-en-cijfers/gaswinning.html#iframe=L2VtYmVkL2NvbXBvbmVudC8_aWQ9Z2Fzd2lubmluZw.

Dutch natural gas production has halved over the last 5 years and 75% of this decline has been driven by the lower output from the country’s giant Groningen field.

7 Calorific value is 35.7 megajoules per cubic metre (MJ/m3).

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Following an increasing number of earthquakes in the province of Groningen, linked to the natural gas extraction in the area, the Dutch authorities have imposed successive caps on Groningen’s gas production starting from 2014. The turning point was the 3.4 magnitude earthquake, which hit the Groningen province in January 2018 and led the Dutch government to decide on the Groningen phase-out plan in March 2018. According to the plan, natural gas extraction from the Groningen field will fall below 12 bcm/y no later than October 2022 and be completely phased out by 2030 at the latest (van den Berg, 2018). In December 2018 the Dutch government announced a revised plan, aiming to reduce Groningen production to below 5 bcm/y from 2023 (Reuters, 2019d).

Groningen gas has a notably lower calorific value (L-cal) compared to the average European natural gas (33.3 MJ/m3 vs 40 MJ/m3), which means it cannot simply be replaced by other (imported) natural gas sources. These need to be converted to low-calorific gas (principally via nitrogen blending). Figure 2.25 shows that in the last four years conversion facilities have been increasingly replacing the declining natural gas production from Groningen. Gas conversion has risen six-fold over the last 5 years, from 4.8 bcm in 2014 to almost 29 bcm in 2018. This also means that converted gas now accounts for over 60% of total L-cal gas production in the Netherlands.

Figure 2.25 L-cal gas production in the Netherlands, 2014–18

Gas quality conversion now accounts for about 60% of total L-cal gas output in the Netherlands, whilst the utilisation level of conversion plants reached 88% in 2018.

In its latest annual report, Gasunie noted that the utilisation rate of conversion facilities was 88% through 2018 (Gasunie, 2019a). Moreover, GasunieTransportServices, the Dutch transmission system operator, notified market participants on numerous occasions through the last heating season that quality conversion had almost reached its maximum capacity. This led to market participants being asked to adjust their high-calorific to low-calorific gas balance to reduce nitrogen usage (GTS, 2019). In order to accommodate the gradually declining production cap on the Groningen field without disrupting the natural gas supply-demand balance in the Netherlands and northwest Europe, a number of measures have been undertaken. A new conversion facility in Zuidbroek is due to be commissioned in the first quarter of 2022, allowing Groningen gas production to decrease by 7 bcm/y (Gasunie, 2019b). In addition, the nine largest industrial users of Groningen gas will be forced to switch to other

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