Piped natural gas from Norway has been proving invaluable to Germany amid unreliable Russian supplies. Relations between the European Union and Russia have deteriorated since the latter invaded Ukraine, which has also negatively impacted Russian gas exports to Germany.
Figure 1: Top 10 natural gas inflows into the German market. Source: Energy Projections Germany natural gas fundamentals dashboard
This has presented Norway with an opportunity to increase its share of gas in the German market, the biggest consumer of the fuel in the EU. Moreover, Norway has taken steps to further boost its gas production, which will enable the country to export even more of the fuel to Germany over the coming years.
Norway sends gas to Germany using various channels. Norwegian gas enters Germany directly via pipelines, such as Europipe and Norpipe. The direct supply of Norwegian gas to Germany amounted to 14.73 billion cubic metres (bcm) between January and April of 2022, much higher than 8.85 bcm during the same period in 2021. This also accounted for almost 22% of Germany’s total gas inflow in the first four months of 2022, significantly higher than the 12.3% share in the corresponding 2021 period.
Norway transports gas to Belgium via Zeepipe, some of which is subsequently sent to Germany using pipelines connecting Belgium and Germany. Germany received 6.32 bcm of piped gas via Belgium between January and April of 2022, sharply higher than 416 million cubic metres (MMcm) during the same period in 2021. The share of gas via this route accounted for 9.5% of Germany’s total gas inflow in the first four months of 2022, much higher than 0.6% during the corresponding 2021 period.
Germany’s diminishing reliance on Russian gas
The EU envisages independence from Russian gas well before the end of 2030. Furthermore, it has an ambitious target to reduce Russian gas imports by two-thirds by the end of 2022 as part of its REPowerEU plan, which was published in March 2022. The bloc aims to achieve this by a variety of measures, such as finding alternatives to Russian gas and LNG, increasing biomethane production as well as further promoting renewable energy and energy savings.
Germany, being the biggest consumer of gas in the EU, will have to drastically cut its dependence on Russian gas if the REPowerEU plan is to be realised. Germany is already taking measures to reduce its reliance on Russian gas, but they fall short of the REPowerEU targets.
Germany receives Russian gas using the Nord Stream pipeline as well as pipelines traversing Poland, the Czech Republic and Austria. In February 2022, German Chancellor Olaf Scholz suspended the certification of the Nord Stream 2 pipeline – a key step to prevent the country from further increasing its dependence on Russian gas.
Germany has also reduced gas uptake using the existing Nord Stream pipeline. The country imported only 17.47 bcm of the fuel using the pipeline between January and April of 2022, marking a fall of 5.2% on an annual basis.
Meanwhile, the total volume of gas entering Germany via Poland, the Czech Republic and Austria amounted to only 8.12 bcm in the first four months of 2022, much lower than 20.48 bcm during the corresponding 2021 period.
The Polish volume includes the Yamal pipeline flow. Germany’s uptake of gas via Yamal has all but stopped since Russia invaded Ukraine. Germany received 510 MMcm of the fuel between January and April of 2022, only a fraction of the 10.28 bcm the country imported in the corresponding 2021 period.
Energy Projections expects Germany to reduce the import of pipeline gas from Russia by 25% in 2022 compared with 2021.
Bright future for Norwegian gas
Norway perceives growing demand for its gas in Germany, which could see it becoming the biggest supplier of the fuel to Germany before 2030. Meanwhile, persistently high oil and gas prices have bolstered Norway’s hydrocarbon export revenue, which in turn will enable the country to invest more in its upstream. As a result, Norway is positioning itself to further consolidate its position in the German gas market.
Norway’s upstream investment is gathering pace, which will be supportive of the country’s gas output over the coming years. In 2021, Norway invested approximately NOK 150 billion in existing fields and the development of discoveries on the Norwegian shelf. The Norwegian Petroleum Directorate forecasts year-on-year increases in investment between 2023 and 2025, which the agency expects will contribute to growth in hydrocarbon production till 2030.
The country’s gas production is already rising thanks to robust upstream investment in recent years. In 2021, Norway commenced hydrocarbon production from five fields – Duva, Yme, Solveig, Martin Linge and Ærfugl. The country produced 115.2 bcm of gas in 2021, marking a rise of 2.6% on an annual basis.
Author: Abhishek Kumar, Chief Analytics Officer, Energy Projections