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Safety risks prompt Dutch court to order cuts at Groningen gas field

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Screen Shot 2015-11-18 at 09.13.40Sectors | Wed Nov 18, 2015 4:33pm IST

By Anthony Deutsch and Toby Sterling

A Dutch court on Wednesday ordered more cuts in gas production at Groningen, Europe’s largest gas field, saying the government had given too little consideration to the stronger and more frequent earthquakes extraction had caused.

Output at the field, the world’s 10th largest, will now be capped at 27 billion cubic metres (bcm) per year from 33 bcm, the court said, adding that the government had failed to sufficiently weigh public safety risks.

The spate of earthquakes has caused extensive damage in the Netherlands’ northernmost province.

Groningen, along with a few smaller Dutch fields, supplies about 15 percent of the Europe’s gas and proceeds made up more than 5 percent of government revenues for the national budget during recession years 2011-2013.

“Although the minister (economy minister Henk Kamp) was entitled to attach great importance to the security of supply, he permitted a higher level of extraction than the average that is required,” a summary of the 70-page ruling said.

Kamp had argued that 33 bcm was the minimum needed to guarantee supply in a cold winter. The court said 27 bcm was enough for an average winter, but added: “Should it turn out to be a relatively cold year, the maximum gas extraction can be raised to 33 billion cubic metres.”

The order applies to production through October 2016.

The court also rejected Kamp’s calculations of safety risks from earthquakes and said he would have to incorporate a better assessment by October 2016.

The government has twice this year reduced production from its original target of 39.4 bcm, sending regional prices higher.

But British gas prices for delivery next summer and next winter fell by more than 3 percent to 34.60 pence per therm and 38.40 pence/therm respectively.

Point Carbon analyst Oliver Sanderson said the announcement was not a great surprise.

“Healthy supply from other sources such as LNG (liquefied natural gas) from Qatar, as well as piped imports from Russia and Norway have eroded any bullish impact of Groningen production cuts over the past 10 months,” he said.

In February, Kamp ordered production cut to an annualised rate of 33 bcm for the first half of the year. In June Kamp ordered a further cut to 13.5 bcm for the second half of the year. (Additional reporting by Nerijus Adomaitis in Oslo; editing by Susan Thomas)


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