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Earthquakes force cut in Netherlands' gas production

The Netherlands' government has imposed a sharp cut in production from the country's largest gasfield, and has set aside a fund to compensate property-owners, after an increase in earthquake activity

Groningen onshore field, which supplies 67% of the country's total gas production, will be curtailed for three years while the authorities assess the problem.
Responding to complaints of damaged buildings, followed by a report in January which said there had been an increase in frequency and intensity of earthquakes in the north of the country, the economics ministry said production from the Groningen field will be cut from the 53.8 billion cubic metres (cm) of last year to 42.5bn cm in 2014 and 2015, and then to 40.0bn cm in 2016. The first small earthquake in the north of the country was noted in 1986, and to the end of last year 1,012 have been recorded.

In addition to the €1.2bn ($1.6bn) set aside for compensation, the government will see its revenues from gas cut by €700m this year, €600m in 2015 and €1.0bn in 2016 as a result of lower production, the economics ministry said. NAM, the 50:50 venture between Shell and ExxonMobil which holds the field, will also see its revenues cut.

Although discovered in 1959 and brought on-stream in 1963, the Groningen field still dominates the Netherlands' gas reserves and production. Originally-recoverable reserves of 2.8 trillion cm have been reduced to 824bn cm remaining on 1st January, according to official figures - but the field still accounts for 73% of the country's total gas reserves, of 1,130bn cm.

To encourage the development of smaller fields on- and offshore, the authorities have since the 1970s placed a limit on the volumes produced from Groningen. In the present 10-year planning period, running to 2020, the field had been allowed to produce a total of 425bn cm plus 20bn cm held over from the previous period.

With Groningen operated as a swing-producer, the smaller fields have little spare production capacity. Accordingly, the production cuts will force the Netherlands to increase its imports of gas or trim its exports. The country has built-up a role as an international gas trader, backing-up its sales of foreign gas with the security of the vast delivery capacity of the Groningen field - with about 300 wells drilled over the 900 square-km field, production can be raised quickly to cover any shortfalls in foreign supplies.

The main buyers of gas from the Netherlands are Germany (25.3bn cm in 2012 according to the BP Statistical Review of World Energy), France (9.4bn cm), the UK (7.3bn cm), Italy (6.8bn cm) and Belgium (5.2bn cm). Imports come mainly from Norway, the UK and Russia.

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