Germany, Netherlands Push North Sea Drilling to Shun Russia

(Bloomberg) -- Germany and the Netherlands are moving closer to starting new gas production in the North Sea as part of broader efforts to reduce reliance on Russian energy imports.

The German state of Lower Saxony and Dutch energy company ONE-Dyas BV aim to pump natural gas from undersea deposits 20 kilometers (12 miles) north of the islands of Borkum and Schiermonnikoog, according to the state's Ministry for Economic Affairs. A final investment decision is expected by summer, and drilling could start by the end of 2024, ONE-Dyas said.

European countries are rushing to reduce dependence on Russian energy, with gas the key sticking point. An ongoing payments dispute has already prompted Russia to cut supplies to Poland and Bulgaria, adding urgency behind political efforts to reduce exposure to Moscow. That could prompt authorities to cast aside environmental concerns about new drilling.

While the European Union plans to phase out oil and coal imports from Russia, gas is harder to offset because of the large volumes involved and because of pipelines and other infrastructure developed over decades.

Germany has managed to reduce its dependence to 35% from the more than 50% last year by securing emergency shipments of liquefied natural gas, but further progress could be difficult as Europe's largest economy currently lacks terminals for the fuel.

The government is finalizing legislation that would speed up the approval process for LNG projects, according to Economy Minister Robert Habeck, who will visit Wilhelmshaven on Thursday. The Lower Saxony coastal town will be a location for a floating LNG import terminal.

“More than ever, we now have to base our energy supply on more robust pillars,” Habeck said Wednesday in a statement. “We are in the process of freeing ourselves step by step from the grip of Russian imports.”

Russian Replacement Plan Germany imported 46 billion cubic meters of Russian gas in 2021. Here's how Berlin plans to offset those volumes:
• LNG deliveries via the Netherlands in 2022	1 bcm
• Floating LNG import facilities to be phased in starting in late 2022	33 bcm
• Additional LNG supplies starting this winter	7.5 bcm
• LNG terminals targeted for 2026	8 bcm
Source: German Economy Ministry

The Netherlands is in a better position. The country plans to end its imports of Russian gas by the end of this year. While its gas deposits could help its neighbor, it's planing to wind down its giant Groningen field after Dutch cities suffered damage from earthquakes triggered by drilling.

The North Sea exploration area would help fill the Russian gap, with the potential to produce as much as 4 billion cubic meters annually, according to Lower Saxony. The supplies will be divided between the Netherlands and Germany.

The plan is now awaiting approval by Lower Saxony's parliament, which is expected by end of this month, a ONE-Dyas spokesman said. The company is also expecting to get a nod from Dutch authorities in the next couple of weeks. After that, it will still have to go thorough permitting processes in both countries.

While Germany's ruling coalition set out in its government program that it doesn't want to expand drilling in the North sea, the final decision is left to regional governments.

Officials on the nearby islands are opposed to the plan due to concerns about the environmental impact.

“These protected areas are very sensitive to the entry of pollutants,” said Joachim Bakker, head of the regulatory and social department of Borkum. The areas could be impacted by issues from construction and gas flaring on the platform to methane leaks and greater ship and air traffic, he said.