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NAM €265 BILLION REVENUE FROM GRONINGEN GAS: THEN THE EARTHQUAKES CAME

Once good for 20% of the government revenue and extra influence in Europe, now a national blight: the natural gas extraction in Groningen. The crane is getting closer and closer. But when the earth stops shaking, nobody knows.

€ 265 billion: Total revenue from Dutch natural gas revenues in the period 1960-2013 amounted to approximately € 265 billion.

The Groningen field was a jewel in the Shell portfolio.

Printed below is an English translation of an article published today by the Dutch equivalent of the Financial Times, Financieele Dagblad under the headline: 

If you produce gas, you do not actually have to do anything

By Carel Grol

Harry Klevering (68) can still remember the arrival of the gas. About eight years old, he was the youngest of a family of thirteen from the Groningen village of Spijk, when the gas bubble was discovered in Slochteren in the late 1950s. Soon after, the Dutch Petroleum Company (NAM) visited his house, the company that still lives a life later on gas. To install free gas pipes. Tightly over the plinth, even though the tubes were plastic.

This Tuesday afternoon Klevering is in the office of Centrum Veilig Wonen in Loppersum. He just reported damage. He has lived in the same house for 24 years. Red bricks with a pointed roof, on the water. It is the second time that he has suffered damage. On Tuesday there were two explosions and then it felt like the house was falling.

Timeline

Gas extraction in the Netherlands

1947

Nederlandse Aardolie Maatschappij is founded on 19 September. Shell and Esso both have a 50% interest.

1959

At Slochteren the famous Groningen gas field is tapped. This field is one of the largest gas fields in the world.

2012

3.6 earthquake on the Richter scale near the village of Huizinge.

2013

NAM wins 53.9 billion cubic meters from the Groningen gas field. That is a fraction more than the year before. In the following years, the extraction will be significantly reduced, because in the province there is a lot of damage. In 2017 this is 21.6 billion cubic meters.

2018

Earthquake of 3.4 on the Richter scale near the village of Zeerijp. It is certain that gas production will be further reduced.

Not too long ago, gas was a blessing. For the people, also in Groningen, and for the country. Superior on coal: easier in the supply, easier to use, many times cleaner. After the discovery of the gas, a network was rushed into the ground – the latter quite literally.

Privatization is not allowed

There are about 12,000 kilometers of gas pipelines in the Netherlands. The owners are network operators: companies such as Alliander, Enexis and Stedin. And they are back in the hands of provinces and municipalities – and thus ultimately of the State. Privatization is not allowed. It is of national importance that the gas is delivered to the far corners of the Netherlands.

The country became rich. ‘Total revenue from Dutch natural gas revenues in the period 1960-2013 amounted to approximately € 265 billion. The natural gas revenues thus have been a substantial source of income for the State for over fifty years’, the Court of Audit wrote in a report four years ago.

‘In the early 1980s, gas revenues accounted for nearly 20% of the government’s revenues’, according to the Court. This means that the gas discovery ‘has had a major impact on the emergence of the post-war welfare state’.
Few physical offers

That was relatively easy.

People literally broke into the development of the Drenthe peat areas and in the Limburg mines. The struggle against water is intertwined in the Dutch psyche because of the ever-dreaded danger of a swelling water mass. Gas, on the other hand, was highly technological and required few physical sacrifices.

Gerrit Krol was a writer – in 2001 he won the P.C. Hooft Prize for his entire oeuvre – and worked as a programmer for Shell for many years. He reported extensively on the exploitation of the Groningen fields. ‘You do not have to do much if you produce gas. Actually nothing, “he wrote 60,000 hours in his autobiography in 1998. 

Another excerpt from that book: “In the evening I drove through the province. It became dim, the sun went down in mists and in the same nebulae new suns rose, it seemed like: production location, orange lit by sodium lamps. (…) You step into the car and drive through this unearthly empty landscape. Further on, in the direction of Delfzijl, you see new lights burning. Nightly traffic plazas look like the seas of light, artificial ice rinks with no skater to be seen. ‘

Gas came from the low plains in Groningen – Muntendam, Scheemda, Loppersum, Usquert, wrote Krol – and the benefits ended up with the government. That was the deal, it was that simple.
Down, but with how much?

It is the question that everyone is concerned with but nobody has any answer to. That gas extraction will go down is obvious, but with how many billion cubic meters is still unclear. No party has spoken out loud about that.

In any case, the reduction of gas extraction has little effect on the State Treasury. The gas price is low and production has already gone down. Gas accounts for 1% to 2% of state revenues. For example, in the earthquake file, there are many more questions without an answer.

The most important is: what level of gas extraction is safe? There are different theories about this, but no consensus. It is therefore not clear what a safe level is. Even if gas extraction is stopped, there may be earthquakes for years to come.

Eventually Eric Wiebes, Minister of Economic Affairs and Climate, has to say it. ‘It is up to the Minister to weigh up security and security of supply if necessary. The minister ultimately decides what must be done with the gas production in Groningen ‘, according to the State Supervision of Mines.

Influence in Europe

‘The importance of gas for the Netherlands, there you can make a PhD (in many countries the highest academic degree, ed.),’ Says Marcel Kramer, director of Gasunie between 2003 and 2010. Under his leadership, that company became one of the largest gas transporters in Europe, including a liquefied natural gas terminal and a gas pipeline to England. Thanks to the gas, the Netherlands has gained considerable economic influence in Europe, Kramer is convinced of that. The Groningen field was a jewel in the Shell portfolio. ‘In the Netherlands we have a lot of knowledge of water management and agriculture and horticulture’, says Kramer. ‘But we have also been actively involved with the gas technology.’

However, the Dutch disease arose. In the seventies gas became so dominant that the economic base of the Netherlands was eroded. A lot of money in a small economy, and so you got inflation, says Kramer. “We got the flu, but other countries have become sick to death.”

Kramer himself worked in Venezuela for two years. That country has colossal oil reserves, but is structurally in economic crisis, where it goes from bad to worse. No, then it is all right here.

But then the earthquakes came.

Cannot just stop

The Netherlands can not just stop gas production, says Kramer. The interconnectedness with the European energy market is great: there are long-term supply contracts. We are faced with a ‘time squeeze’, says the former Gasunie CEO. ‘The problem is acute, but the solution is not available.’

Everything has come under pressure from the earthquakes. Profits, business operations, future production. The Netherlands is renowned for the ‘Gas Building’: the cooperation between the State and various companies for the extraction and sale of natural gas. The big question is whether the walls of that gas building are already starting to tear. Kramer has no answer to that. But he does say: ‘Proudly propagating what we all can do in the gas field, that disappears.’

Instead, there are the damages. Like Klevering, which he has just reported to Centrum Veilig Wonen. ‘Sixty years of gas has been extracted. Logically that it goes wrong once, ‘he says.

His damage is not too bad. Klevering keeps birds: canaries and check marks, and after the quake the thermopane glass of his bird house was broken. Not a major item of damage, but something that the NAM must reimburse.

DUTCH SOURCE WITH COMMENTS

ARTICLE ENDS

EXTRACT FROM WIKIPEDIA 

The Groningen gas field is operated by the Nederlandse Aardolie Maatschappij BV (NAM), a joint venture between Royal Dutch Shelland ExxonMobil with each company owning a 50% share.[3] The field accounts for 50% of the natural gasproduction in the Netherlands, the other 50% being supplied by around 300 smaller gas fields, most of them located offshore in the North Sea.

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EXTRACT: LONDON — An independent Dutch safety panel has found that the operators of Europe’s largest natural gas field, Royal Dutch Shelland Exxon Mobil, as well as the Dutch government, for years ignored the dangers posed by earthquakes in the field. In a report published on Wednesday, the Dutch Safety Board, a government-financed but independent organization, concluded that “the parties concerned failed to act with due care for citizen safety in Groningen” related to the earthquakes caused by gas extraction.

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EXTRACTS

Like other residents of the Groningen region near The Netherlands’ North Sea coast, the retired art teacher was used to the subtle tremors caused by decades of extraction at Europe’s largest gas field. But nobody was prepared for the magnitude 3.6 earthquake that struck after dark on Aug. 16, 2012, assured by both state and project officials that there was nothing to fear. Half a decade later, Treffers is still reeling. His claim for damages to his brick home, which he had to gut and retrofit with quake-resistant framing, is one of 80,000 that have been filed with the company tapping the underground riches, a venture between Royal Dutch Shell Plc and Exxon Mobil Corp. known as NAM.

“Groningen gas has always been a source of pride to the Dutch,” Prime Minister Mark Rutte said in the region last month. Those days are gone. What was once a blessing is now an expensive curse. Aside from slashing the amount of gas NAM can pump, the state has set aside 1.2 billion euros to compensate residents, including for emotional damages, and the final bill will almost certainly swell. Officials are also considering criminal charges against NAM executives for posing a threat to human life, which would be a first in the Netherlands, where Shell is triple the size of the next biggest company.

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