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False impression given over Shell/Exxon Groningen deal with Dutch Government?

Printed below is an English translation of an article published today by the Dutch Financial Times, Financieele Dagblad. NAM is the Shell/Exxon Joint Venture company responsible for the earthquake blighted Groningen Gas Field and consequential potential bill for untold billions to deal with damaged residences.

Shell and Exxon pay much less to Groningen funds

Ulko Jonker, Carel Grol • Economics & Politics

The State pays almost 90% of the € 1 billion fund for Groningen and the oil companies Shell and ExxonMobil only pay € 135 million on balance. This is confirmed by the Ministry of Finance, after questions from the FD. At the presentation of the deal between the State on the one hand and Shell and Exxon on the other, about the end of the gas production in Groningen, the impression was still created that each accounted for half.

On Monday, the agreement was signed between the Ministry of Economic Affairs and Shell and ExxonMobil, each with a 50% stake in NAM. They will refrain from claims against the State, and would deposit € 500 million into a fund for Groningen. That was the result of ‘tough negotiations’, as Rolf de Jong, CEO of ExxonMobil Benelux put it.

Contribution from NAM

In the statement by Minister Eric Wiebes of Economic Affairs, it stated that the government and the region are working ‘on a new future perspective for Groningen to strengthen the economy and the quality of life in the region’. Shell and ExxonMobil would also contribute to this.

‘This has resulted in a contribution from the NAM of € 500 million. The Cabinet intends to release at least the same amount’, according to the statement. ‘This means that a total of at least € 1 billion will be available for the future perspective for Groningen.’

Distribution key

However, the oil companies in the NAM pay net less than those € 500 million. This is because the NAM partners can recover most of the costs from the State in the form of a reduced payment, partly from State participation in the Energy Management Netherlands, partly from the tax authorities. .

In addition, the allocation key for costs has also been changed with the agreement. The NAM partners received 10% of the revenues from gas production. 90% of the gas revenues went to the State. In the cost allocation, NAM paid 36% and the government 64%.

This allocation key was, in the Minister’s words, ‘no longer sustainable’, because less gas may be extracted and because the costs increase. That is why the NAM partners will receive 27% of the profits from this year and the State will now cover 73% of the profit, but also of the costs.

The company earns more on gas production and therefore has to pay less. The ‘state subsidy’ for the costs incurred by NAM will rise and in return the company will decide against the rest claim.

Immediately

The new distribution of the proceeds from Groningen also applies immediately to the € 500 million that the NAM will soon deposit into the fund that is to provide a ‘new future perspective’ for Groningen. According to the old distribution key, the NAM would pay 36% of it. According to the agreement that has just been concluded, this is 27%, both the Ministry of Economic Affairs and the NAM confirm.

So just over a quarter of that € 500 million actually flows from the NAM greenhouse in Assen. That is € 135 million. The remaining € 365 million is settled at the back. The State itself adds at least € 500 million to it. The additional costs are charged to the national debt and are not at the expense of other expenses.

SOURCE

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