Royal Dutch Shell Plc  .com Rotating Header Image

Groningen Earthquakes: The week in which the NAM lost control

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

The week in which the NAM lost control

Carel Grol Weekend: 3 February 2018

NAM experienced a week like a fever dream. Gesteggel about the guarantee, a new damage protocol, leaked secret documents, advice for radical production reduction. It does not get any easy, said CEO Gerald Schotman in December, but as busy as it has never been before. And the position of the NAM is steadily declining.

Maybe it started a week earlier. On Tuesday, January 23, the Court of Appeal in Leeuwarden ruled that the Nederlandse Aardolie Maatschappij should compensate the depreciation of houses by gas extraction, regardless of whether the houses are sold or not and whether there is physical damage. Estimated damage: € 1 billion and possibly more, says Pieter Huitema, the lawyer who assists Groningen homeowners.

The court has adopted an earlier ruling of the court almost entirely. The NAM therefore lost the appeal, and that fits in with the trend: at the moment, NAM is losing the bulk of the lawsuits. The company that wins gas in the Groningen field can still go into cassation. “Then it does not take the problems in Groningen seriously,” says Huitema, supported by the victory in courtroom. NAM’s response to the court’s decision: ‘We are going to take a serious look at it.’

The action of Shell

But the potential billions allowance that the company has to pay turned out to be the least of the worries of NAM CEO Gerald Schotman cum suis a week later. First there was Trouw’s first: Shell had withdrawn the ‘403 statement’ for NAM. As a result, Shell, which, like ExxonMobil, holds a 50% interest in NAM, is no longer jointly and severally liable for the subsidiary. Or as the whole of the Netherlands interpreted: Shell withdraws its hands from the NAM!

Except Shell itself then. Initially there was a rather weak announcement: ‘Shell Nederland will endeavor to keep NAM financially sound in the long term’, the company said on Sunday. Two days later, Marjan van Loon, president of Shell Netherlands, had to come and save everything. She appeared at Eva Jinek’s table, and also in the House of Representatives. Van Loon’s words left no room for doubt: ‘We just guarantee, bills are paid.’

The NAM could not help it that Shell withdrew the 403 statement, but it did not work out well at the Assen company. Because usually a parent company will not withdraw a guarantee if it goes very well with a subsidiary.

NAM at a distance

Wednesday afternoon there was the next tick. Minister Eric Wiebes of Economic Affairs and Climate, launched the new damage protocol, at the provincial government building in Groningen. The NAM was removed from the settlement of that damage. ‘That was emphatically the wish of the Groningers and also of us as a company’, Schotman said in a statement that same afternoon.

We have been negotiating for almost a year. The NAM caused the damage with the quakes, but was also responsible for the financial settlement. These are opposing interests – the butcher who approves his own meat. And the NAM, as it is called in the Hoogeland in Groningen, is training champion. Damages are not dealt with, people are not taken seriously. So it was clear: the NAM must be out of the handling.

Only after the quake in Zeerijp on 8 January, with a force of 3.4 on the Richter scale the heaviest in years, the new damage protocol really took hold. That is crucial, because without protocol no handling and no handling do not compensate people with cracks in the walls.

The State steps in

Thousands of things were on the shelf, until last Wednesday.

The State has stepped in. He will handle the damage reports. The compensation that people with cracks get in their walls, the State will start to recover from the NAM. In this way ‘Assen’ loses a lot of influence: it can no longer take care of the handling.

Everything now depends on the deal that the NAM concludes with the State. Wiebes speaks about generous compensation. A possible consequence is that the NAM therefore has to pay much more – but that is all food for lawyers who have to make a deal. There is also a positive downside: NAM was reviled because of the endless delay of claims handling. That will not happen anymore, since the company no longer plays a role in the handling.

Gas extraction to 12 billion cubic meters

The last tap, with the power of a wrecking ball, followed Thursday. State Supervision of Mines (SSM) advised on the safety of gas extraction to 12 billion cubic meters per year. That is a halving compared to last year, and in 2013 another 53 billion cubic meters of gas were recovered. Minister Wiebes said almost immediately that he would follow the advice. The only question now is how quickly gas extraction will be phased out.

Moreover, inspector-general Theodor Kockelkoren of SSM: “I expect new measures in the future.” Gas recovery to zero? Kockelkoren’s answer was somewhat formal: ‘It is absolutely conceivable that safety standards will only be met when stopping gas production.’

The NAM is nothing more than to follow the minister. Wiebes is the man who ultimately determines the extraction level. And Wiebes is committed to a substantial reduction. ‘Assen’ must obey that.

Directed

For example, ‘week five’ in calendar year 2018 was the week in which NAM was shaken to its foundations and lost control. Gas production will not be shortened immediately, but it is certain that production will decrease in the coming years. The future of NAM? Less extraction, so less income and thus less profit. No influence on the claims handling.

There are difficult times, there in Assen.

royaldutchshellplc.com and its sister websites royaldutchshellgroup.com, shellnazihistory.com, shellnews.net and cybergriping.com are all owned by John Donovan

0 Comments on “Groningen Earthquakes: The week in which the NAM lost control”

Leave a Comment

%d bloggers like this: