European Gas Network Stable Despite Falling Dutch Production

Despite production cuts at the Groningen gas field in The Netherlands, European gas networks will have stable supply in the short and long terms, according to an industry source that spoke to Reuters.

The Dutch government authorized another 10 percent output reduction last week in order to reduce seismic risk in the area. In its prime, the field produced 53 billion cubic meters (bcm) per day, but the new round of cuts will limit output to 21.6 bcm.

“The European gas system has leeway and can handle further declines in Dutch production,” Stephan Kamphues, board spokesman of Vier Gas Transport, said. The company owns and operates Open Grid Europe (OGE), Germany’s 12,000 km (7,500 mile) gas pipeline. “There is no supply problem,” he added.

The announcement has put upward pressure on gas prices, but supplies are still stable despite Holland’s incremental departure from the fossil fuel market.

“The vision is once the Netherlands have left (as producer), the market will decide on the origin of gas,” he said.

In the meantime, Russia continues to increase its exports to Europe. Gazprom shipped 190 billion cubic meters of natural gas to Europe in 2017—a record high, according to Bloomberg. In 2018, that figure is expected to dip slightly to 180 billion cubic meters, which will still be the second-most on record.

The higher reliance on Russian gas may come as a surprise, not least because of the ongoing tension between Russia and some European countries on a variety of issues. Russia’s intervention in Ukraine and its annexation of Crimea in 2014 led to a standoff between Russia and the West—but Europe’s imports of Russian gas are up more than 25 percent since then, despite a lot of rhetoric in Brussels about diversification.

By Zainab Calcuttawala for Oilprice.com

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