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Dutch court orders cut to Groningen production

Giant Dutch swing gas field output to be halved, creating room for more peak winter deliveries from outside the European Union

Production from Groningen, the largest gasfield ever found in western Europe, will be temporarily limited to 27bn cm/year - half the 53.9bn cm it produced in 2013 - according to a ruling by the highest court in the Netherlands.

It represents a further setback to the field’s operator and 60% owner, NAM, which is owned half each by Anglo-Dutch Shell and US ExxonMobil. The other 40% is owned by the government.

Less Dutch gas may lead to more non-EU imports such as LNG and Russian gas and thus higher prices over the winter, when the field is operated flexibly to meet heating needs in northwest Europe.

The adminstrative division of the Council of State ruled 18 November that its new 27bn cm cap may be raised to a maximum of 33bn cm only if the 2015-2016 gas year proves to be relatively cold. A temporary suspension of production in the Loppersum area must stay in force.

Economy minister Henk Kamp imposed an annual Groningen cap of 39.4bn cm in January 2015, which he reduced in June to 30bn cm in a normal year; or to 33bn cm if very cold. The 18 November Council of State ruling, which cannot be appealed, sets aside both his decisions and implements 'interim relief' measures that will apply until six weeks after he issues a new one. "The minister will now have to make a new decision on whether gas extraction will be limited to less than the 33bn cm he permitted in June 2015," said a statement from the court. It noted that Kamp showed no bias and was entitled to make his decision based on best available studies at the time. Nonetheless it determined that he under-estimated the damage drilling could do in specific areas. As it is some 100,000 buildings have suffered structurally from tremors, officially caused by drilling.

Dick Kleijer, chair of residents' group Groningen Bodem Beweging, one of the plaintiffs, said the minister could not ignore the ruling: "We are delighted that the Council of State confirms what we have been calling for years: too little account is taken of Groningen people's safety."

Adding to NAM's discomfort, minister Kamp said 16 November he would propose a new law in 2016 to shift the burden of proof so that NAM will have to prove it has not caused damage to buildings.

In September, a court in the region ruled it reasonable to compensate homeowners, even when there's no visible damage -- which their lawyer Pieter Huitema said meant that NAM may end up paying €5bn ($5.3bn) in damages at a later hearing. NAM has vowed to appeal the ruling; it has until 2 December to do so.

Pre-2014 when a cap of 42.5bn cm was imposed to limit tremors, Groningen accounted for some 9% of Shell's and 8% of Exxon's operating earnings.

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