Oil price crash could pull plug on new domestic production projects in Germany

The price crash on international oil markets caused by the coronavirus pandemic is having a heavy impact on Germany's domestic oil industry, with companies cancelling exploration projects and seeking to substantially cut their operating costs, Christian Schaudwet writes for the energy policy newsletter Tagesspiegel Background. While Germany's largest domestic oil producer Wintershall-Dea says that production at home will remain an important part of its operations, the waiving of its exploration licenses makes it clear that the company no longer plans to expand its operations there, at least not for the time being, Schaudwet writes. Competitors like Neptune Energy are also reducing their activities in Emsland, Germany's most important oil drilling region in the north-western coastal area close to the Dutch border. "Producing oil and gas in Germany currently is very unattractive due to the very low prices," market analyst Steffen Bukold told Tagesspiegel Background, adding that the expected "dash for gas" across Europe as a substitute for reclining coal power so far has not materialised due to low prices and the increasing competition by renewables.

Domestic oil and gas production covers only a very small fraction of Germany's total fossil fuel consumption. According to the country’s Federal Association of Natural Gas and Oil (BVEG), the country produced about six billion cubic metres of natural gas and just under two million tonnes of oil in 2019, a slight decline compared to the previous year. Thanks to its proximity to end users, domestic oil and gas have a slightly less damaging climate impact than imported fuels, the industry group argues.