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Watch: The future of European gas after Groningen

Gas production at Groningen, Europe's largest gas field, will end in 2022, eight years earlier than planned due to the risk of earthquakes. The move will leave the continent's gas market 54 Bcm/year short compared with 2013.

S&P Global Platts latest special report, The future of European gas after Groningen, we examine how the European gas market will change and the consequences of the shutdown for the energy industry.

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Natural gas production at Europe's largest gas field will end in 2022, eight years earlier than planned, because of the risks of earthquakes in the region triggered by drilling.

Production at the giant onshore Groningen field in the Netherlands began in the 1960's and hit a record high of almost 88 billion cubic meters 13 years later. Infrastructure around the field was developed to supply consumers in the Netherlands, Germany, Belgium and northern France. Unlike gas from Russia and Norway, as well as LNG, Groningen's gas is classed as low-calorific, and Europe relies heavily on it.

You can see Groningen's extensive L-gas network from the pink pipes in this map.

The Groningen phase-out will create a deficit of low calorific gas across all those European markets, and sooner than expected. Work has long been underway to prepare Europe for the transition, including projects to convert more H-gas into L-gas, since L-gas networks are unable to accommodate H-gas.

The Groningen phase-out will leave the European gas market 54 billion cubic meters short compared with 2013.

The gas shortage is likely to be partially covered by an increase in Russian gas, which can currently reach Europe via three entry points. In addition to that, Nord Stream 2 is expected to start flowing gas early next year. Gazprom aims to invest in around 250 billion cubic meters a year of new production capacity to come online in the next five years.

LNG is another source of supply. The loss of Groningen volumes comes as the global LNG market looks to remain oversupplied, with a surge of new production coming online in the US Gulf Coast and Australia. This leaves plenty of supply to fill the upcoming shortage in Europe.

Speaking of European gas prices, Groningen's phase-out is likely to have a moderately bullish impact, since the market will be less flexible and more dependent on pipeline imports and LNG.

As shown on this chart, the trend can already be seen in the 2022-21 contango on the pivotal Dutch TTF trading hub, with 2022 prices almost 2 Euros megawatt hour above the 2021 price during 2019.

Producing at more than 50 billion cubic meters a year in 2013, it would have been inconceivable then to imagine Groningen being completely closed within 10 years.

However, the hole left by Groningen doesn't seem to be worrying the European gas market as a whole. With sufficient LNG and Russian imports, Groningen can be easily displaced.

Across the industry, the narrative for natural gas is changing from excelling as a partner to renewables over the next few decades, to being part of the problem now.

Please find more information about the Groningen phase-out in our special report 'The Future of European Gas After Groningen'.

Thanks for watching. For more Platts insight, visit spglobal.com/platts