Dutch Producer Welcomes Output Clarity

The Exxon-Shell operating company NAM welcomed the clarity that the economics minister Henk Kamp provided late last week with the statement on the 3bn m³/yr cut in output from the Groningen gas field from October 1 – the start of the next gas year – it told NGE June 27.

The field can produce 27bn m³ this gas year, and it had produced 18.4bn m³ between the start of October 2015 and end-May 2016.

The limit will be 24bn m³ for the gas year starting October 1 2016, with implications for gas storage use as well as for the finance ministry. However this ceiling may be raised proportionately if the temperatures justify it. The new cap will apply until the end of September 2021.

Quoting the minister, NAM said: "'The aim is for as even a distribution of extraction as possible, with as few fluctuations as possible.' Since it's a preliminary decision, we do not speculate on the monthly production profile for next year." The Dutch mining authority said that studies showed that it was not only heavy production, but also rapid ramps up and down, that varied the reservoir pressure and caused earthquakes.

That might not rule out a gradual rise and fall in output over the course of the year, depending on how the monitoring goes. But so far this year the output has been relatively stable: from a low of 2.19bn m³ to a high of 2.68bn m³.

"It’s good that the minister has taken his next step in the process to a definitive decision on gas production from the Groningen gas field, which he will announce before October 1," NAM told NGE. "NAM is aware that the preliminary decision is an important milestone for all parties involved, especially for the inhabitants of the province of Groningen, but also for our company. This preliminary decision provides clarity and stability. Now everybody has the possibility to share their point of view on it. NAM will also study the documents and reports, on which the minister has based his preliminary decision."

Economy minister Henk Kamp said the government's approach to cutting output was working: the number of earth tremors and their intensity has fallen significantly. "The latest decision means that the natural gas extraction from the Groningen field will have halved since the current Cabinet took office in 2012," he said. 

In a statement last week the cabinet said that the assent will apply for a period of five years. This period enables a proper measurement of the effects of limiting the extraction to 24bn m³. An evaluation moment after two years will be built in, to allow consideration of the question whether developments, such as better knowledge, justify an adjustment of the production level.

Dutch economy minister Henk Kamp (Photo credit: Dutch government)

National grid operator GasTransport Services, which is state owned, advised that the new limit guarantees security of supply of low calorific for the Netherlands as well as gas for gas consumers in neighbouring countries who are dependent on low calorific gas from the Netherlands in an average year. In the event of a colder winter, an additional volume of natural gas of maximum 6bn m³ can be produced on top of this from the Groningen field. This additional production will only be permitted to the extent that the temperatures in that year fall below those of the average year, it said. 

William Powell       | www.naturalgaseurope.com