Communicator

Europe is facing a deepening energy crunch as domestic natural gas production plunges to its lowest level since 2021, even as demand surges to multi-year highs. According to the latest Gas Exporting Countries Forum (GECF) report, European gas output dropped 8% year-on-year in the first quarter of 2025, reaching just 47.7 billion cubic meters (bcm)-a stark reversal after a brief rebound in 2023 and 2024. The decline accelerated in March, with production falling 4% compared to the same month last year, marking the fifth consecutive month of shrinking output.

Figure 1 - YTD Europe’s gas production. GECF Monthly Gas Market Report – May 2025. Source: GECF Secretariat based on data from Refinitiv, the Norwegian Offshore Directorate and JODI Gas


Norway, which supplies about two-thirds of Europe’s gas, led the downturn. Its production fell 7% to 31.5 bcm, reflecting both natural field depletion and a lack of new investments. The UK’s output also shrank by 5% to 8.3 bcm, largely due to extended maintenance at the Bacton Gas Terminal. The Netherlands, once a cornerstone of Europe’s gas supply, saw a dramatic 25% collapse to just 2.4 bcm, a consequence of depleted reserves and government-mandated shutdowns of key fields such as Groningen. Across the continent, new exploration and investment in upstream gas projects remain at a standstill, further constraining supply.

Figure 2 - Left - Europe's monthly gas production / Right - Y-o-y variation in Europe's gas production by country. GECF Monthly Gas Market Report – May 2025. Source: GECF Secretariat based on data from LSEG, the Norwegian Offshore Directorate and JODI Gas. Note: EU countries include Austria, Denmark, Germany, Italy, Netherlands, Poland and Romania.


While production falters, European gas consumption is moving sharply in the opposite direction. Demand surged 9% year-on-year in the first quarter, reaching 134.8 bcm, and totaled 160.6 bcm from January to April-up 6% from the previous year. March alone saw a 5.2% jump in EU gas demand, extending a seven-month streak of rising consumption. This demand spike is driven by colder weather, a rebound in industrial activity, and-critically-a sharp drop in electricity generation from renewables. As wind and solar output faltered, gas-fired power plants were forced to ramp up, especially to stabilize grids during periods of volatility.

Figure 3 - EU-16 incl UK: NatGas Consumption for Power Generation in bcm per month; Burggraben analysis; Commodity Essentials; Bloomberg.


The situation has been further complicated by the unprecedented blackout that struck Spain and Portugal in late April. The sudden loss of 15 gigawatts-around 60% of Spain’s power-within seconds exposed the vulnerabilities of a grid increasingly reliant on intermittent renewables and cross-border flows. During the restoration, Spanish grid operator Red Eléctrica prioritized dispatchable sources, notably nuclear and combined-cycle gas plants, to quickly bring the system back online. Compounding this, Spain’s reliance on imported gas has grown: LNG imports from the United States surged to 35% of Spain’s total this year, up from 20% last year.

Europe’s gas market is now under mounting pressure. With domestic production in freefall, the continent is turning increasingly to imports. The International Energy Agency forecasts a 25% surge in European LNG imports this year, as lower piped gas flows and robust demand force buyers to seek supplies on the global market. This scramble for LNG is driving up prices and intensifying competition with Asia, where demand is now falling in the face of higher costs and Europe’s willingness to pay a premium.

Figure 4 - EU quarterly imports by source. Last updated: 11/04/2025. Source: Bruegel based on ENTSOG, GIE and Bloomberg


At the same time, gas storage levels across the EU remain a concern, with inventories at 43.67% of capacity as of mid-May-significantly lower than the seasonal averages and well below last year’s levels at this time. The situation varies by country: Germany’s storage is at 36.45%, Italy at 52.78%, France at 50.78%, the Netherlands at just 29.67%, Austria at 50.20%, and Spain leading with 72.29%. This depletion reflects the impact of a colder winter and increased withdrawals to offset reduced imports, particularly following the halt of Russian gas transit through Ukraine at the start of 2025. While Norway remains the EU’s largest supplier, Russian gas flows have edged higher again, even as ongoing political uncertainty clouds the outlook for future deliveries.

Figure 5 - GIE's Aggregate Gas Storage Inventory


The combination of falling domestic output, rising demand, and tight global markets is pushing European gas prices higher. Industrial users now face costs up to five times those in the United States, threatening competitiveness and raising fears of renewed energy-driven inflation. Without urgent investment in new production, infrastructure, and flexible backup generation, Europe’s energy security risks further erosion-especially as climate volatility and grid instability become more frequent.

Figure 6 - Dutch TTF Gas Jun '25 (TGM25) in euros per megawatt-hour (€ / MWh). Source: Barchart


The Spanish blackout stands as a warning: in a system where renewables dominate but dispatchable capacity is neglected, the margin for error is razor-thin. As Europe scrambles to keep the lights on and factories running, the continent’s self-inflicted gas crunch is fast becoming a test of both energy policy and political resolve.

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