February 4, 2019 (06:25)

The energy policy on provision of the country’s energy balance of the Netherlands may change

On January 21st, 2019, Annie Krist, the executive director of “GasTerra”, the Dutch energy company (25% of “GasTerra’s” shares are owned by Royal Dutch Shell, another 25% – “ExxonMobil”, 50% of the company’s shares are owned by the Dutch government) published an analysis of prospects for natural gas production in the Netherlands. 

According to her, gas production in the area of ​​the largest Dutch marine gas field “Groningen” may be reduced to 4 billion cubic meters of gas per year as early as 2020, and by the end of 2030, gas production in the “Groningen” area will be fully suspended. Annie Krist noted that starting from 2030, like most developed EU countries, the Netherlands will turn from a leading gas exporter to gas importer and the government of the country is working on a policy to further ensure the country’s energy balance. Annie Krist stressed that the current infrastructure for the transportation (import) of gas to the country, in its existing state, is not able to ensure the pumping of the necessary volumes of gas imports, which will increase significantly after 2030, following the significant reduction of domestic gas production in the country. The expert noted that today the annual volumes of gas consumption in the country amounted to about 39.5 – 40 billion cubic meters of gas per year. Gas production in 2018 in the “Groningen” region amounted to 40 billion cubic meters.

Apart from transportation of imported gas to the country, the issue of sources of supply of necessary volumes of gas remains unresolved, as it was mentioned by Annie Krist. In early 2018, “GasTerra” commissioned a study by the well-known international consulting firm “IHS Markit”, which had to formulate policy options for the government of the Netherlands to ensure the country’s energy security after the full suspension of gas production in the “Groningen” area. IHS Markit experts came to the conclusion that the purchases of gas in the European spot market by the Netherlands, in particular in the TTF gas hub, and the import of liquefied natural gas‎ from other regions, cannot fully meet the annually increasing demand for gas and guarantee the country’s energy security.

IHS Markit believes that the main directions of the new gas policy of the Netherlands shall be focused on maintenance of high reliability, liquidity of the TTF gas hub operation, development of liquefied natural gas imports and search for long-term contracts for pipeline gas supplies. 

Specialists of the company believe that in case of intensification of gas cooperation with the Russian Federation, the fact that the commercial strategy of the Russian gas monopoly “Gazprom” is aimed at increasing the volume of gas sales in the EU spot market is worth noting.

According to Annie Krist, “GasTerra” does not plan to increase gas imports under long-term contracts in the short run; however, preparations for a new reality (gas import) in the long run should start today. At present, natural gas amounts to more than 40% of the energy balance of the country. Annie Krist noted that “GasTerra” is studying possible sources of gas supplies to the country in the future. In addition, the government of the Netherlands is working on policies aimed at reducing demand for gas in the country, implementing  the development of renewable energy sources, studying the possibility of replacing natural gas with other alternative gases, in particular hydrogen and biogas. According to Annie Krist, about 300 million cubic meters of biogas per year is already produced in the Netherlands, which, at present, according to the energy characteristics, is comparable to all solar energy generated in the country. There is a potential to increase biogas production in the Netherlands up to 3 billion cubic meters per year by the end of 2030, as Annie Krist noted. In this case, production of hydrogen is considered as a tool for storing redundant generation of renewable energy (solar energy, wind energy, etc.).

The “Groningen” gas field was discovered in 1959 and is the largest in the EU. The mining rights belong to Nederlandse Aardolie Maatschappij BV (or NAM), 50% of which is owned by Royal Dutch Shell, and 50% is owned by Exxon Mobil. In 2013, gas production in the area of ​​this field reached its peak of 59 billion cubic meters of gas per year. This year natural gas production is expected to be reduced to 19.4 billion cubic meters per year. In addition, drilling of additional wells to maintain gas flow causes increased seismic activity in adjacent areas, and in such a way, the 3.4 magnitude earthquake was recorded in the area of ​​the deposit in 2018. In March 2018, growing seismic risks and negative public opinion regarding further development of the field forced the government of the Netherlands to reduce the volume of gas production in the “Groningen” by 75% over the next 5 years (until 2023), and schedule  full suspension of  gas extraction  in the area of ​​the deposit  for 2030.

According to Hans Besselink, a Dutch lawyer and energy security expert, the Supreme Court of the Netherlands is currently considering the “Groningen case” submitted by non-governmental organizations and opposition parties that are trying to completely stop the development of the field or at least limit the volume of gas production to 12 billion cubic meters per year as soon as in 2019. 

Hans Besselink mentioned that the sudden stop of gas production in the “Groningen” region is impossible in terms of energy security of the country, and the gradual reduction of gas production to 12 billion cubic meters per year in the case of a corresponding court decision will take at least 2-3 years. During this period, the government will be forced to find additional sources of gas to meet the needs of industrial gas consumers. Hans Besselink remarked that the final decision of the Supreme Court of the Netherlands on the case of “Groningen” should be expected by the end of January.

According to Eric Wiebes, the Dutch Minister of Economy and Climate, representatives of the gas industry in the Netherlands and the EU expected and foreseen a gradual reduction of gas production in the country. At the same time, the probability of a significant reduction in gas production in the short run has become a challenge for the industry.

Eric Wiebes noted that the liquefied natural gas‎ terminal “Rotterdam” is able to provide 12 billion cubic meters of gas storage capacity for imported gas annually. After reducing the gas production in the area of ​​the “Groningen” deposit to 12 billion cubic meters per year in the short run, the demand for pipeline gas imports in the Netherlands will be about 16 billion cubic meters of gas. Norway and Russia are the most likely suppliers of gas for the Netherlands, according to the minister. At the same time, only the Russian Federation, provided that the pipeline construction of the “Nord Stream 2” is completed, can provide the necessary rapid increase in the volume of gas pumping into the Netherlands.

Consequently, due to decisions taken by the Dutch government in 2018 to reduce gas production in the “Groningen” region by 75% in 2019 and to completely suspend production from the field in 2030, the Dutch government can ensure imports of about 12 billion cubic meters of liquefied natural gas to maintain the energy balance of the country and supplies of up to 16 billion cubic meters of pipeline gas. For this purpose, the Netherlands can sign a long-term gas agreement with the Russian Federation as the only gas producer able to meet the gas needs of the Netherlands in the short run.


Picture: uk.wikipedia.org

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