Groningen Gas Extraction Decision: a workable compromise

18-10-2016

The Cabinet has spoken. The Groningen ceiling will remain at 24 billion cubic meters per gas year (which runs from 1 October to 1 October) for the next five years. In a cold winter, up to six billion cubic meter extra can be won, and in the case of operational problems, up to one and a half billion cubic meter more, to avoid the security of supply being compromised. This decision is based, for instance, on a study of national and international network companies who have insight into the total physical demand for low-caloric (Groningen) gas. GasTerra is currently translating the cabinet decision into commercial activities.

Under the Mining Act, every company that wishes to extract natural gas in the Netherlands has to submit an extraction plan. This includes a description of the planned extraction method and its impact on the environment. The State Supervision of the Mines (SodM) and the Technical Committee for Soil Movement have to review the extraction plan submitted and advise the Ministry of Economic Affairs.

In April 2016, the NAM published the Groningen extraction plan, after which GTS and the SodM were able to give their opinions on this plan to the Ministry of Economic Affairs. On June 30, the Ministry published the Endorsement Order on the Groningen extraction plan. The parties involved, including civic organisations, then had six weeks to submit their points of view and comments. In total, the Ministry received no less than 282 unique points of view and comments.

After publication of the draft decision, members of the House of Representatives posed a total of 178 written questions, which were answered in writing by the Minister, as usual. After a round table discussion on September 8 of the Parliamentary Committee for Economic Affairs with experts, including GasTerra’s CEO Gertjan Lankhorst, and the plenary parliamentary debate on September 14, a vote was held on a number of motions submitted during the debate. The most important was a motion, which was carried, by the socialist MP Jan Vos (PvdA). The House of Representatives invites the Minister to annually review whether the volume can (read: has to) be reduced. The Minister has agreed to do this. He can add additional terms and conditions to or withdraw his endorsement. This condition is referred to in the explanatory statement to the decision. The final decision was published on September 30. Interested parties have until November 11 to lodge an appeal with the Council of State. The Province of Groningen has since made use of this possibility. The provincial authorities are not convinced that the gas extraction cannot be reduced further. This means that the Cabinet decision is not yet final.

The new decision differs from the previous one on a number of points:

  • The roles of the producer, NAM, the transporter, GTS, and GasTerra in operational problems have been clarified. Until now, many stakeholders of GasTerra, including politicians and civic organisations, thought that the agreed volumes in GasTerra’s export contracts are decisive  for the production required from the Groningenveld. This is incorrect. Gasunie Transport Services has calculated how much Groningengas is necessary to guarantee security of supply of low-caloric gas in the Netherlands and abroad. The Minister shall make a decision on this. The commercial supply contracts of GasTerra and other market parties ultimately follow the market volume created.
  • Reports have to be filed after the end of the gas year*1, and before October 31 on the volume, degree days and any operational problems at GTS.
  • The current cluster structure is maintained; the Loppersum cluster is still available only to guarantee the security of supply when needed.
  • Seasonal and monthly fluctuations in the production of natural gas should be avoided as far as possible, but the security of supply has priority over the prevention of fluctuations.

GasTerra is satisfied about the Minister’s decision. A workable compromise has been found between the security interests of the population of Groningen and the required security of delivery for the millions of households that depend on Groningengas. In addition, it gives the companies involved in the implementation of the Cabinet decision, including GasTerra, sufficient room for manoeuvre to respond to the challenges of the structural reduction in production.