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Shell ‘less concerned’ about Groningen natural gas quota impact than production safety: CFO

London (Platts)–2 Nov 2017 958 am EDT/1358 GMT

Anglo-Dutch major Shell is willing to take a financial hit on production from the giant Groningen gas field in the Netherlands to ensure that output can be achieved safely, company CFO Jessica Uhl said Thursday.

Speaking to reporters after it published its Q3 earnings, Uhl said Shell — which has a 50% stake in Groningen operator NAM — is focusing on safe production from the field.

“We are working with our partners and with the [Dutch] government to ensure we operate safely — that’s the priority,” Uhl said.

“We are less concerned about the financial implications,” she said.

Output from Groningen — which was producing as much as 54 Bcm/year as recently as 2013 — has been limited by the government due to the damage caused to buildings in the region by seismic activity caused by drilling.

As of October 1, the Groningen production quota is 21.6 Bcm per gas year, a reduction from the previous annual quota of 24 Bcm.

However, the new Dutch coalition government has proposed reducing the production quota at Groningen by 1.5 Bcm by 2021, implying a new limit of 20.1 Bcm by that date.

Adding to the lack of clarity around how much Groningen will be allowed to produce in the future, the Dutch Council of State, the country’s top administrative court, is to make public in mid-November its ruling with regard to a slate of appeals made with regard to the Groningen quota.

A range of appeals were heard by the court over the course of in July, including some requesting a stricter output quota, some demanding production at Groningen be halted altogether, and an appeal from operator NAM for clarity on the government’s Groningen policy.

NAM’s other 50% shareholder is US major ExxonMobil.

Uhl said cooperation with all stakeholders on safe Groningen production was the key.

Shell, Uhl said, is focused on “getting the situation to work for all the important stakeholders.”

“More needs to be done so that all the stakeholders feel things are going in the right direction, that production going forward is safe,” she said.

Earlier Thursday, Shell said it expected lower output from Groningen in the fourth quarter, but that this impact would be offset by higher production from its Nigerian operations.

–Stuart Elliott, [email protected]

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