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Dutch Court to Review Gas Output in Part of Groningen Field

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Screen Shot 2015-04-14 at 08.30.55By Isis Almeida and Elco Van Groningen: Published 21 May 2015 by

A Dutch court will review natural gas production at a cluster of the Groningen field, Europe’s biggest, after earthquakes linked to extraction damaged buildings in the Netherlands’ most northern province.

The Administrative Jurisdiction Division of the Council of State will review production at the Eemskanaal cluster before June, judge Peter van Buuren said at a hearing in The Hague Thursday. A request to suspend extraction in the area, which accounted for 5 percent of production from the Groningen field in the first four months of 2015, had been rejected on April 14.

The Netherlands, the European Union’s biggest gas producer, has progressively reduced output at its Groningen field amid tremors. While Economy Minister Henk Kamp said the nation will decide in July on whether to cut this year’s target production by 11 percent, the court in The Hague ruled last month to suspend output at Loppersum, another of the field’s clusters.

“Market impact will be minimal due to the volumes involved, so it’s not going to make a huge difference,” Wayne Bryan, an analyst at Alfa Energy Group, said by phone. “The main decision will be in July, when we will know output for the rest of the year, which will have a bearing on prices.”

Gas production in Groningen fell 34 percent to 11.57 billion cubic meters (0.4 trillion cubic feet) from January to April, according to Nederlandse Aardolie Maatschappij, or NAM, the Royal Dutch Shell Plc-Exxon Mobil Corp. joint venture that owns 60 percent of the field. That’s about 53 percent of the Netherlands’ total output, Bloomberg calculations using data from grid operator Gasunie Transport Services BV show.

Drilling Study

A group of residents of the Groningen province asked for an accelerated motion to suspend gas production in Eemskanaal. A study of drilling effects on which last month’s ruling was based, was inadequate, Henri Sarolea, a lawyer for the residents, said at the hearing.

It’s in the character of preliminary rulings to fix flaws in earlier rulings, Van Buuren said. “We have to look at the case seriously again.”

Eemskanaal produced 0.54 billion cubic meters of gas in the first four months of the year and the area has an annual cap of 2 billion cubic meters, according to NAM. Production for the remainder of the year is expected to be similar to that in the first four months, Hans Besselink, a lawyer for the Ministry of Economic Affairs, said during the hearing. Output in the Loppersum cluster accounted for less than 10 percent of Groningen’s output.

“If the court decides for a shutdown, it can have bigger implications for Dutch gas because it can make way for further shutdowns,” Moses Rahnama, an analyst at London-based consultants Energy Aspects Ltd., said by e-mail Wednesday.

2015 Production

Kamp said earlier this year he would decide July 1 on cutting full-year output from the Groningen field to a maximum of 35 billion cubic meters from the current cap of 39.4 billion. In December, the cap was reduced from 42.5 billion.

“Europe has declining domestic gas production and production issues in the Netherlands will accelerate the increase in Europe’s import dependency,” Leslie Palti-Guzman, director of global gas at The Rapidan Group LLC, said by e-mail Wednesday. “So a lot is at stake, not just for the Netherlands but for the whole EU.”

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