Dutch to close EU's biggest gas field to limit tremors

Output from the Groningen deposit will be cut by two-thirds from the year starting October 2022 and halt by 2030 to ensure the safety of people in the province of the same name after earthquakes linked to extraction, Economy Minister Eric Wiebes said Thursday. The specific type of gas from the field is used by millions of households and thousands of businesses in the Netherlands, Germany, Belgium and France.

Tremors have continued to shake the northern Netherlands since 2014, when the government started reducing flows from the field. The latest cap was set at 21.6 Bcm a year, which is equivalent to almost 5% of the European Union’s total gas demand. Nederlandse Aardolie Maatschappij BV, a venture of Royal Dutch Shell Plc and ExxonMobil Corp., operates the field and is bound by current production limits.

The nation’s gas is also a major source of budget revenue, with proceeds seen at almost 2 billion euros ($2.5 billion) this year. Dutch gas network manager Gasunie said last month that at least 14 Bcm of output is needed to ensure security of supply, rising to as much as 27 billion in an extremely cold year.

The Dutch plan to build a 500 million-euro facility over three years to convert imported gas into fuel that can replace Groningen output, the government said.

“It’s a pity this option wasn’t built a few years ago,” said Volko de Jong, managing partner of the Global Gas Networks Initiative, a Groningen-based gas industry adviser. “It’s smart. Yes, it’s a wise thing to do.”

By October 2022, and possibly a year earlier, gas production will fall below 12 Bcm a year and to 7.5 Bcm for the 12-month period from that date thanks to the nitrogen facility, decreased foreign demand and the conversion of the biggest 53 domestic industrial users, the Cabinet said in a letter. Increased purchases of nitrogen and switching more companies might allow even quicker declines.

Foreign buyers of Dutch gas are also building such facilities, potentially reducing the need for fuel from Groningen. Lower gas supply from the Netherlands would increase northwest Europe’s reliance on foreign fuel, most of which is piped in from Russia and Norway. It may also lead to increased purchases of liquefied natural gas cargoes from countries including Qatar and the U.S. to curb further expansion of the two gas powers.

“During 2018-20, European LNG imports are anticipated to grow faster than previously expected due to restrictions on production at the giant Groningen gas field in the Netherlands,” John Twomey, head of European gas analysis at Bloomberg New Energy Finance, said in the Global LNG Outlook March 22.