Netherlands plays safe with 2022 Groningen gas cap of 12bcm

29 March 2018 14:45 Source:ICIS

Annual natural gas production from the Netherlands’ giant Groningen field will fall to 12 billion cubic meters (bcm) by October 2022 and eventually phased out altogether, but will not change significantly in the current gas year, the Dutch government announced on Thursday.

“No later than October 2022, but possibly a year earlier, gas extraction will fall below the level of 12bcm,” said Eric Wiebes , economic affairs minister in a letter signed off by the cabinet in the morning.

“The consequences of gas extraction are no longer acceptable in society,” added the government, saying production would fall to zero by gas year 2030 at the latest.

Source: Government of the Netherlands

But in the near term, the production cap will remain at 21.6bcm in an average year, leaving gas prices on the Dutch TTF unfazed.

One trader described the plans as: “Really bearish. It means no big change in the near future.”

Another agreed the announcement was in line with expectations.

But the government left the door open to further cuts, warning that: “The risk of a serious earthquake also remains with an annual gas extraction at the level of 12bcm”.

With the next general election slated for 2021, it has to reconcile security of supply with voter support.
Concrete steps

In order to reach its targets, the government must reduce demand for Groningen’s low-calorific gas (L-gas) and offset falling supply with increased conversion of high-calorific gas.

It confirmed on Thursday the expansion of a conversion facility at Zuidbroek that could substitute 7bcm/year of production, and is pressing ahead with existing plans to wean large industrial users off low-calorific gas by 2022, which could save another 4.4bcm/year.

Pan-industry body VEMW suggested earlier in the week that the government proposals were too vague.

“There is no clear framework in which the possibilities and most cost-effective measures are explored, including their financing,” it said.

The government hopes to reduce its current exports to Germany, France and Belgium by 2bcm/year “in the coming years,” it said, but added that it was not currently possible to accelerate the conversion of foreign L-gas customers’ appliances.

Germany’s EWE already announced plans to cut its demand by 1.7bcm by building its own conversion facility.
Death of a giant

The Netherlands is the largest natural gas producer in the EU and the giant Groningen field represents the majority of domestic production.

At its peak in the 1970s, the field was pumping 88bcm/year, and on average 42bcm/year between gas years 2005-2014.

But increasingly severe earthquakes linked to gas extraction have put the government under pressure to slash output . patrick.sykes@icis.com

By Patrick Sykes