The European oil and gas market has been volatile in the last few years due to change in demand and supply of oil and gas. The economic crisis has reduced gas consumption rates and so the imports in 2015. This volatility is due to excess supply of gas leading to cheap market value and lack of the US and China import demand due to their shift of interest in unconventional gas production. Te ebbing demand has led to falling of gasoline’s growth contribution to 7.7% in 2016. In 2017, prices of oil and gas it likely to pull higher due industrialization, colder winter conditions and road transportation in Europe. Also, due to the slowdown of nuclear sector in Europe after Fukushima nuclear disaster, an increase in annual gas consumption of 20 to 40 billion cubic meters is expected from 2016 to 2020. Aftermath of 2011 Fukushima nuclear disaster, Germany had shut down 7 nuclear power plant and likely to exit more by 2020. Looking further, import of oil and gas by European countries is like to increase.
Key Product Categories & Technologies
The key product from crude oil and gas are kerosene (jet fuel), gas/diesel and gasoline. These are most important products which have shown different evolution patterns in last few year. The consumption of these products is major in the transportation sector. Petroleum products are also used for non-energy purposes which are second highest after transportation. Non-energy consumption includes lubricants for reducing friction, bitumen for road development and oil products used in chemical industry.
The total consumption of key products gasoline, kerosene (jet fuel), diesel, residual fuel oil and other products was 13.8 million barrel/day. Major consumption was of diesel 4.89 million barrel/day.
Production of crude oil and natural gas is done by drilling a rig on ground, after which it is separated from water and solid impurities. Natural gas sent to Gas plant or reused in the field in Gas injection wells. Crude oil is sent to refineries to produce naphtha, gasoline, kerosene diesel and other petroleum products. Natural gas is used in power plants as raw material to generate power as it is a clean energy resource.
A lot of new advancements have been developed in the extraction of crude oil and natural gas. These advancements are more cost efficient, higher yields and have a lesser surface disturbance.
Top Players & Company Share
The leading company in Europe is Royal Dutch Shell followed by British Petroleum Total. European countries have 20% of largest companies, contributing to 21% of enterprise value and 20% of production. There was a fall in total revenue in these companies due to fall in oil and gas prices and it was reflected in their share prices.
Growth Drivers & Restraints, Major Trends and Issues
The combination of cold temperature and transportation sector has will rise demand of oil and gas in European countries. Until the first quarter of the 2016 year, the demand was of 210 kb/d but it gradually rose to 510 kb/day by end of the year. The average demand of oil in 2016 was 13.9 mb/day. Due to more 75 heating degree days, the demand for diesel, LPG, and gasoline increased in last quarter.
Considering unconventional gas resource, there are significant reserves in European countries but only a few are focusing on capitalizing on them. Since Poland wants to reduce imports from Russia, it has gained more than 40 drilling licenses to major US Oil and Gas Companies. Meanwhile, France has banned gas drilling for shale gas production due to environmental concerns.
Competitive Dynamics & End market mix
Most of the European Countries are not much keen in the production of Shale gas due to the complexity of geological structures and strict environmental legislation. Hence the production cost is as high as 25 Euro per MWH which is higher than the price in the market.
Import of Crude oil and gas will rise in a further year, due to growing consumption and falling production rates. In 2016, net imports rates were 18 % higher than in 2015 and will continue to rise. The total import cost was 30% lesser than previous due falling prices of oil and gas. UK and Germany are the biggest gas market facing and increment of 19% and 26% respectively.
Pipeline import of gas from North Africa continue to increase by countries Spain and Italy.
The dependency of European oil and gas market will continue to increase in coming years due to rise in consumption. Crude oil and the Natural gas price will observe an uplift in coming years and so will the capital invested. An increase in demand for the key product will be observed in coming years due to growth in transportation and chemical sector.
The volatility of the market is certain due to USA and China ebbing demand of oil and gas. The focus of European countries on Shale gas is less due to its strict legislative regulations and environmental concerns.
- Market growth drivers
- Top players
- Global regional insights
- Technology outlook
- Europe and Asia Pacific
- Oil and Gas, refinery Industry, petrochemical industries.