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Shell/Exxon Induced Earthquakes undermine Dutch Gov Revenues

Screen Shot 2015-04-14 at 08.30.55By John Donovan

The Groningen gas field is a giant natural gas field located near Slochteren in Groningen province in the northeastern part of the Netherlands. Discovered in 1959, it is the largest natural gas field in Europe.

It is operated by the Nederlandse Aardolie Maatschappij BV (NAM), a joint venture between Royal Dutch Shell and ExxonMobil, with each company owning a 50% share. For decades all went well.

The venture was a money spinner for Shell, Exxon, the Dutch government and the local population.

This was before ground tremors linked to gas extraction started in the provence of Groningen and grew in intensity until they could fairly be described as earthquakes.

Now experts are saying that the earthquakes could reach 4.6 on the Richter scale.

The tremors have not only caused widespread damage to properties and their values, but are undermining the credibility of the Dutch government and NAM, after it was revealed that the dangers caused at the Groningen field were ignored for years by the Dutch authorities and Shell/Exxon.

As the intensity of the tremors increases, so does the growing anxiety by all those affected, particularly residents in the area.

The news media has also realised that this is a big story. 

A judge has halted production at the small Northern part of the gas field because of the safety concerns.

An expert says that judges and politicians are making technical decisions about matters they do not understand and may not work, or have unforeseen consequences.

With the enforced reduction in one location, production at other locations within the field will have to be ramped up to replace lost government income.

These changes will create pressure variations in the field with the potential to generate new earthquakes, for example in the southern part off the gas field and/or affect the recovery factor of the field, especially if the government decides to limit the production of the whole field.

Even in the event that the recovery factor decreases by a small percentage (already in the books in 2009 at a staggering 97%), it could result in a decrease of 100-200 billion m3. That represents a colossal sum of money!

Reduced income from Groningen would be a major blow to the Dutch government, limiting scope for buying votes by promising nice things, as politicians like to do. 

Only if the total gas production is substantially cut will there be any chance that the earthquakes will reduce in frequency and intensity.

The same expert says even if this is done, there can be no guarantees and to expect long time lags before the intensity and frequency of the earth tremors decrease.

With all this uncertainty, is it still reasonable to assume that the remaining gas reserves of Groningen remain unchanged? Will there be a write down any time soon of the reserves that are now in the books?

Someone may wish to raise this important question at next months Royal Dutch Shell AGM in The Hague. It is likely to be a timely and hot topic in Holland.

Presumably Shell learned a lesson in 2004 to be more honest with reserves reporting.

ARTICLE ENDS

The first two paragraphs are extracts from a Wikipedia article

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