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NAM Groningen earthquakes cause major social unrest

Thousands of people protested in Groningen against natural gas drilling. Photo: Joris van Gennip

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

2 February 2018

Minister Wiebes opts for security in sensitive files

Louis Hoeks Carel Grol • Economics & Politics

Minister Eric Wiebes of Economic Affairs and Climate has chosen a party. The safety of the Groningen population goes beyond economic interests. He is going to halve the gas revenues from the Groningen gas field, even though it undermines the so-called security of supply.

The State Supervision of Mines (SSM) advised Thursday Thursday to reduce gas production to 12 billion cubic meters per year. Last year that was just under 24 billion cubic meters. In 2013, 52 billion cubic meters were won.

How production is reduced is still unclear. At the end of March, the government will indicate how it looks at gas extraction. And that will also be the basis for the so-called extraction decision for the coming year.

According to Massimo Di-Odoardo, gas analyst at Wood Mackenzie, production from the Groningen field is likely to gradually decrease over the next four years. ‘That will have limited consequences for the safety of the energy supply and prices.’

Gas extraction in Groningen has led to earthquakes. This has caused damage and major social unrest. The extraction was reduced. Because winning less also means fewer earthquakes, that is the underlying idea.

Security of supply

SSM had only looked at the interests of the Groningers, Inspector General Theodor Kockelkoren said. At twelve billion cubic meters, the chances of heavy quakes will be greatly reduced, although the likelihood of quakes remains, he thought. And at zero? ‘It is absolutely conceivable that safety standards will only be met when stopping gas production.’ In other words: it is certainly possible that gas production will have to stop altogether in the future.

While Kockelkoren gave its advice in a press conference, Gasunie Transport Services came up with a completely different vision. According to GTS, for the security of supply, gas production of 14 billion cubic meters ‘in a mild year’ and 27 billion cubic meters ‘in an extremely cold year, such as 1996’ is required. GTS owns and manages the Dutch gas transportation grid.

Wiebes responded by letter. ‘It is evident that with such a decline in production, according to current insights, gas demand from households and companies at home and abroad can no longer be met’, he said about the 12 billion of SSM. On the other hand, the minister acknowledged: “The interests of the Groningen people are not at issue for me.”

He was more determined Thursday afternoon. Gas production must be reduced to 12 billion as quickly as possible, in accordance with the advice of the regulator.

A dynamic approach

For the time being, the minister is doing well in the north. Commissioner of the King René Paas praised his energetic approach this week. He was already in Appingedam and in Zeerijp. The earthquakes in Groningen, said the VVD minister, are ‘government failures of un-Dutch proportions’. His predecessor and party colleague Henk Kamp never used such words. He was accused of approaching the Groningen file too technocratically.

On the other hand, in the last few years that Kamp was minister, he did reduce gas production. That is why Wiebes continues to embroider. Moreover, the new minister has the time. The partial shutting of the gas tap is easier in a cabinet that is allowed to spend money and that is not dominated by austerity measures.

But as Wiebes said at the beginning of January on a driveway of a farm, something outside Zeerijp: ‘It’s about justice.’ And he also said that a tempo should be made. “And I do not want to speculate about money.”

Winnings decision

For the current year, the Minister ‘makes an urgent request to NAM and GasTerra (…) to make maximum use of the space to lower extraction’. This may result in some reduction in gas production, but not a significant reduction. ‘It will not only require a great effort but also some time to reduce the extraction level.’

Or, in the words of Kockelkoren: ‘It is up to the minister to make a trade-off between safety and security of supply.’

There is also the danger. The minister has grown goodwill. Now he has to deliver. And in Groningen there is still a chance of earthquakes, even with lower extraction. A winning of 12 billion is not a sacred number, Kockelkoren emphasised: ‘I expect new measures in the future.’

Brittle confidence

Confidence in the province is fragile. On Thursday a procession of tractors with angry farmers from the earthquake area went to The Hague. Groningen is mild after years of quakes and the extremely difficult claims handling. In that sense, the minister painted himself in the corner: the people in Groningen have high expectations. They expect a substantial reduction in gas production in two months.

Also high expectations for claims handling. After months of gesteggel a new damage protocol has been presented this week, without NAM. Thousands of damage reports that were waiting can now be handled. The State raises itself as a savior, but must actually arrange it. Otherwise, the distrust is back again.

Painful measures

So the minister has to get started: even more consultation with GTS, with Gasterra, with NAM and other stakeholders. Wiebes is not afraid, it turned out in the damage protocol. It is the intention that NAM will pay, he said. “And it’s up to me to get the damage compensated. I also count on that. ‘

Should NAM not be able to do so, which is a serious obstacle for the group and its shareholders, the account may go to Shell, said Marjan van Loon, Shell Nederland’s highest boss, on Thursday in a hearing of the House of Representatives.

This substantial reduction means that painful measures must be taken. Two weeks ago, the minister sorted this out, with a letter to industrial large-scale consumers. Message: they can no longer use Groningen gas in 2020 ‘in principle’. They need to make sustainable or switch from low to high-calorific import gas. The large-scale consumers complained about the large investments they had to make, but the minister had little to say about this.

That also fits in with his mission. Or, as he put it himself in his letter to the Lower House on Thursday: ‘My interpretation of the coalition agreement is that gas extraction must be brought down as much as possible during this cabinet period.’ And there he put a giant step on Thursday.

”The importance of the Groningen people is not a question for me”

• Minister Eric Wiebes

” It will take some time to significantly lower the extraction level ”

• Minister Eric Wiebes

” I expect new measures in the future ”

• Inspector-general of SodM Theodor Kockelkoren

Farmers from Groningen have come to The Hague with tractors to protest prior to the Hearing in the House of Representatives on the payment capacity of the NAM.Foto: Phil Nijhuis

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