The European oil and gas markets and Europe’s oil and gas industry have seen a lot of changes in recent years.

Operators in one of the world’s most mature oil and gas basins, the North Sea, have changed development plans and are now aiming for simpler project executions so that the resources they target could be profitable in a world of low oil and gas prices. The number of projects and plans for tapping more resources offshore the UK and Norway has been rising in the past year, signalling that the offshore industry has turned a corner with upstream companies approving more developments since the beginning of 2018.

Looking at Europe as a region of consumption, one of the key developments in recent months is a steady decline in natural gas prices as pipeline imports from Russia and liquefied natural gas (LNG) imports from the United States are fighting for grabbing shares of the European gas market.    

The Dutch decision to phase out natural gas production at the Groningen field by end of the next decade has reshuffled the European market. European countries will have to rely more on imports from the two major producers in the region—the UK and Norway, as well as on imports from Russia’s gas major Gazprom, but also, increased volumes of LNG imports, as some European nations are wary of the Russian dominance in their gas supplies.

Since the first US cargo of LNG arrived in the EU in April 2016, European imports of American LNG have been rising steadily. Since July 2018, total EU imports of liquefied natural gas from the US have surged by 272 percent, the European Commission said in May this year.  

“Natural gas will remain an important component of the EU’s energy mix in the near future as we move towards cleaner sources of energy. Given our heavy dependence on imports, U.S. liquefied natural gas, if priced competitively, could play an increasing and strategic role in EU gas supply,” Commissioner for Energy and Climate, Miguel Arias Cañete, said, commenting on the data.  

A warmer than usual winter in Asia and declining spreads between European and Asian spot natural gas prices helped US exports to Europe rise by 60 percent in the 2018-2019 winter season compared to the previous two winters, the US Energy Information Administration (EIA) said at the end of July.

“LNG imports to Europe have been relatively low in recent years, but they are expected to grow as new LNG supply comes online and European countries continue to increase natural gas consumption as part of their decarbonisation initiatives,” the EIA reckons.

Commenting on the natural gas prices in Europe, Rystad Energy said in July:

“Natural gas prices in Europe have plummeted thanks to a rising gas export war between Russia and the US, much to the delight of European consumers.”

“It’s a buyer’s market, and Europe is buying,” Carlos Torres-Diaz, head of gas markets research at Rystad Energy, said. “The clear winners from the war between these two gas powers are the European end consumers, who benefit from record-low natural gas prices, and power prices which have dropped more than 30% in the last six months,” Torres-Diaz noted.

Several countries in Europe aim to build infrastructure to boost LNG imports.  

In July 2019, the European Commission said that a Croatian plan to build an LNG terminal at Krk Island was line with EU State aid rules as it “will contribute to the security and diversification of energy supplies without unduly distorting competition.”

The KrK LNG Terminal has been included in the lists of European Projects of Common Interests since 2013, because the EU considers it of strategic importance for the diversification of natural gas supplies into Central and South-Eastern Europe.

Back to the producers’ perspective in Europe’s oil and gas, several major oil and gas fields have recently started up or are about to start up in UK and Norwegian waters.

Equinor expects to start production from the giant Johan Sverdrup oil field in the Norwegian part of the North Sea in November 2019. The Norwegian oil and gas major is also developing the Mariner heavy oil field in the UK North Sea, with production start also planned for this year.

France’s Total started up in June production from the Culzean gas condensate field 230 kilometres off the coast of Aberdeen.

“Culzean is the third UK project to start production this year, but the biggest by a long way. It shows that there is still appetite for big developments in UK waters,” said Glenn Morrall, a research associate with Wood Mackenzie’s North Sea upstream team.

“Once the field hits peak in the early 2020s, Culzean could account for more than 10% of the UK’s gas production,” Morrall added.

“For the French major, production from Culzean will play a big part in it being the biggest UK gas producer for the foreseeable future,” he said.  

New field developments and projects could offset declines at maturing fields in the North Sea.

Since 2015, some 30 new fields in the UKCS have come on stream, helping the UK oil production hit in 2018 its highest level since 2011, the Oil and Gas Authority (OGA) says. Last year, oil production alone rose to 1.09 million barrels per day, up by 8.9 percent from 2017 and the highest UK oil production rate since 2011. Gas production, meanwhile, dropped by 3.5 percent year on year in 2018, the OGA said.

The rise in oil production “can be attributed to over 30 new fields coming onstream since 2015, improved production efficiency and asset integrity, the realisation of enhanced oil recovery (EOR) projects and the UK’s offshore licensing rounds’ continued focus on associated exploration, appraisal and development commitments,” the OGA noted.

Commenting on the OGA’s report, Oil & Gas UK’s Upstream Policy Director Mike Tholen said:
“This is a significant milestone for an industry emerging from one of the toughest downturns in memory. However, in a competitive global market where the competition for investment is intense, it remains critical to maintain the fiscal and regulatory conditions which have supported this solid production performance delivered by industry.”  

It will be the UK, together with Norway, that will lead in the number of planned offshore projects globally between 2019 and 2025, data and analytics company GlobalData said in a report in July.

“In terms of number of offshore projects globally, the UK leads among countries with 14 planned and 31 announced projects. Norway follows with 16 planned and 26 announced projects,” GlobalData says.