Groningen’s rapid phase-out to tighten European gas market
BAKU, Azerbaijan, Feb.21
By Leman Zeynalova – Trend:
The end of gas production at Europe’s largest gas field – the giant Groningen field onshore the Netherlands in 2022 will leave the European gas market 54 Bcm/year short compared with 2013, Trend reports citing the outlook of S&P Global Platts.
“The accelerated phase-out of Groningen production has fuelled price support and volatility as a result of the expected greater dependency of the country on alternative sources of supply,” reads the report.
The soft European gas pricing outlook is expected to prevail in the short term to 2021 amid robust storage levels and unprecedented levels of LNG supply flows to the UK and continental Northwest Europe, according to Platts Analytics.
“The rapid production decline and complete phase-out of the Groningen gas field by mid-2022 will mark a structural change in European gas and tighten the market. The tide of US LNG currently flowing into Europe is also expected to recede from 2021, supporting a recovery in gas prices.”
“Production at the two remaining active Groningen gas fields in the Netherlands totalled only 650 million cu m in October, down more than 46 percent year on year because of the sharp reduction in the output quota for GY-19. This very rapid acceleration in Groningen production stems from the newly imposed GY-19 quota of 11.8 Bcm, which started October 1. The new permit is below the one recommended by the State Supervision of Mines of 12 Bcm, already thought to be difficult to achieve while meeting the required gas demand. This quick ramp down in domestic production will trigger a market tightness, leading to a recovery in Dutch TTF natural gas spot from 2021 to reach an average of Eur19.5/MWh in 2023,” according to Platts Analytics.
The Groningen natural gas field, located near Slochteren in the northeastern part of the Netherlands, is the largest gas field in Europe and the 10th largest in the world.
After the 32-year production high in 2013 and further seismic activity in the Loppsersum area in particular, the decision was made to cap output from Groningen, effectively limiting the amount of gas that would be able to be extracted on an annual basis.
The 3.4-magnitude earthquake that hit Zeerijp in January 2018 saw opposition to gas production at Groningen take an irreversible turn for the worse, with SodM advising the Dutch government to reduce production from the field to a maximum of 12 Bcm/year as soon as possible shortly afterwards, something they took to heart with the current cap for Gas Year 2019-20 (October 1, 2019, to September 30, 2020) at 11.8 Bcm.
The Groningen field is currently slated to end gas extraction in 2022, a decision announced in September 2019.
Follow the author on Twitter: @Lyaman_Zeyn