Eastern European countries have voiced their concerns about Russia’s construction of two new pipelines into Europe, Nord Stream II and TurkStream, through which Moscow hopes to strengthen its position as the leading gas supplier to the European Union (EU).

EU dependence on Russian natural gas

A number of governments have taken steps to promote the development of domestic resources, organising new licensing rounds and modifying some terms of their petroleum fiscal frameworks. However, these countries show declining natural gas production over the coming years, despite new entrants.

The EU’s dependence on imported natural gas has grown over the past 10 years and imports now make up over 74% of consumption.

The most important gas exporters to the EU are Russia, Norway and Algeria, and Russia is also currently trying to secure its position as the EU’s largest supplier into the future through the construction of two new pipelines into Europe, Nord Stream II (55 billion cubic meters (bcm) of gas per year) and TurkStream (31.5 bcm of gas per year).

Natural gas imports into the EU

Source: Eurostat, GlobalData Oil and Gas

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In Eastern Europe, where options for import diversification can be limited, some countries are seeking new investment in domestic resources through new licensing rounds. The fiscal framework has also changed in some Eastern European countries in recent years, producing mixed results.

Across the region, policies to promote domestic gas supply appear to have limited success. Ukraine has seen some increases in production and Romania will see new Black Sea production from the Midia gas development in the early 2020s, though regulatory uncertainty has put the larger Domino project on hold.

The general trend of decline in Poland, Hungary and Croatia appears set to continue in the medium term.

Although the licensing rounds have brought some new entrants to the sector, the bulk of production comes from ageing fields. Integration of their national gas markets into the overall EU gas market may strengthen energy security through the presence of interconnectors and the introduction of pipeline reverse flow capabilities.