Gas Supplies to EU: Europe at a Crossroads

Over the last decade, Russia, Norway and Algeria have been the European Union’s (EU) major gas suppliers. During this period, EU gas imports grew from 253.7 billion cubic meters in 2002 to 317.7 billion m3 cubic meters in 2012. Norway was the main generator of that growth, seeing its share in total EU gas imports rise from 26 percent to 35 percent. New players such as Qatar and Nigeria (both – LNG suppliers) followed suit. Meanwhile, the share of Russia’s gas supply to EU shrank from 48 percent to 36 percent. Algeria’s share was also reduced from 22 percent to 13 percent, the “Reforming the European Gas Market” report says. The paper was presented in Moscow on Nov. 13 by Alexei Grivach, deputy director of the National Energy Security Fund (FNEB). However, according to FNEB experts, Norway is unlikely to sustain current growth levels due to the expected decline in gas production in the future.

Norway’s current production growth is largely based on small fields, which are being developed more aggressively than the giant Ormen Lange and Troll gas fields that serve as backup energy sources. However, as early as this year the total output at Norway’s gas fields is expected to decrease by 8 to 10 percent, FNEB experts predict. "In 2012, production at small fields (outside the top 10) fell by 7 billion cubic meters to 19 billion cubic meters due to depletion of reserves and the fact that no new fields were brought onstream," the report says. Another reason behind the decline are this year’s technical problems that surfaced at the Troll field. They were caused by a compressor failure and are unlikely to be solved before next summer.

Usually, production at Ormen Lange and Troll is seasonal, it receives a boost in winter periods, but last year the fields operated in winter mode all year round. Their aggressive development could accelerate depletion of reserves at these fields. It is true that the Troll field was developed less aggressively (only 500 billion cubic meters have been recovered so far and its initially discovered reserves total 1.43 trillion cubic meters), but production at Ormen Lange was far more intensive with about a third of the field’s reserves of 100 billion cubic meters recovered already, six years after the launch of commercial production. According to FNEB, Ormen Lange could produce at rated output level for another eight to nine years. After that production is expected to start declining. Experts forecast that of all Norwegian gas fields only Troll and Snohvit can sustain current output levels for at least a decade.

Betting on growth of gas export from Algeria to Europe is questionable, too. Over the last five years Algeria’s gas production fell by more than 10 percent (almost 9 billion cubic meters) on the backdrop of domestic gas consumption’s rise by approximately 20 percent (4 billion cubic meters). This led to a 10-billion-cubic-meter decline in the country’s gas exports. Also, part of the gas intended for Algeria’s domestic market