Gasunie Transport Services (GTS) has briefed economy minister Eric Wiebes on the consequences for security of supply if gas extraction in the Groningen region is reduced and a maximum of six production clusters are shut down. Production of gas has been linked to tremors in the region, damaging buildings including private housing.

The briefing by GTS, the Dutch gas transmission system operator (TSO), was a direct response to measures proposed by Dutch gas producer NAM as a result of the earthquake in Zeerijp  on January 8 this year, it said February 1, the day that the supervisory body regulating gas production SSM recommended a cut in output to 12bn m³ from Groningen. It based its view only on physical risks of continuing production, discounting the economic factors at stake.

Wiebes is expected to make his decision on the future maximum output next month. Analysts at Wood Mackenzie said that, before the February 1 advice, it estimated Groningen’s remaining value at $19bn. A cap of 12bn m³/yr could diminish the remaining government take by over $5bn over the life of the field, and is further compounded by the remaining value that state-owned Energie Beheer Nederlands (EBN) stood to realise in the field. EBN has a 40% interest in the giant Groningen field, which is operated with 60% by NAM - itself an equal joint venture of Shell and ExxonMobil.

All Groningen gas produced by NAM is marketed through leading Dutch gas marketer GasTerra, whose shareholders are Shell 25%, ExxonMobil 25%, state-owned EBN 40%, and 10% owned directly by the Dutch state.

Demand for low-calorific gas in the Netherlands and neighbouring countries is met by gas produced from the Groningen field and high-calorific natural gas blended with nitrogen via quality conversion. In the 2017 analysis, GTS stated that if extraction remained flat, a production level of 21bn m³ was sufficient for security of supply, it said.

Temperature-dependent production

The latest analysis shows that reducing gas extraction, whilst maintaining security of supply, is possible if the ‘flat production’ principle is abandoned. That would mean making production from the Groningen field temperature-dependent. In that case, it would be necessary to extract between 14 bn m³ of Groningen gas (for a mild year, such as last January) and 27bn m³ (in an extremely cold year, such as 1996) to guarantee security of supply. 

If there were an immediate transition to temperature-dependent production, the total required volume from Groningen for the current gas year may be between 19.5bn m³ and 21bn m³.

Reducing gas extraction

Two routes can be followed if we want to reduce gas extraction further over the coming years whilst maintaining security of supply: by making production from the Groningen field dependent on temperature, we can make maximum use of quality conversion, a process whereby imported gas is made suitable for domestic use. A level of 33-36bn m³ of low-calorific gas is achievable using existing conversion methods.

Gas extraction can also be lowered by reducing the demand for Groningen gas, for example by scaling down exports or switching industries and power stations over to high-calorific gas. These actions are already underway, but it will take some time before we notice a fall in demand.

Closing down production clusters at Loppersum

In addition to examining how it can reduce gas extraction, GTS at the minister's request looked at the consequences for security of supply if the six production clusters around Loppersum were shut down. It concluded that six production clusters can be taken out of operation during the current gas year and four of the six clusters around Loppersum can remain structurally closed. Further analysis is required to see whether the remaining two clusters can also be structurally closed.

Overview of gas commitment from Groningen field for a cold year and a mild year (rounded to whole bn m³)

NAM comments on damage claims

NAM said February 1 that it was pleased that Wiebes has presented a new damage protocol for Groningen together with the region that afternoon. From now on, the state can resume tackling the damage caused by earthquakes energetically. With this protocol, NAM now definitely stands for the future at a distance from that claim settlement. It said that was emphatically the wish of the inhabitants of the Groningen region and also of it as a company. At the same time it emphasised that NAM will also compensate in the future for the damage caused by earthquakes.

Shell CEO Ben van Beurden also said earlier on February 1 that it would not shirk its responsibility to meet NAM's obligation to pay compensation for earthquake damage. Speaking at Shell's results, he said that NAM had agreed a new protocol with the government whereby claims in future would be handled at arms-length from NAM. It would continue to be NAM's legal responsibility to contribute to that funding arrangement to ensure it was sufficient, while the government would also contribute, he added.