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Shell and ExxonMobil waive gas claims against Dutch State

Groningen Earthquake Damage: ‘Due to the declining gas extraction and the increased costs of damage and reinforcement, the current so-called payment scheme is no longer tenable’

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

Shell and ExxonMobil waive gas claims against State

From our editor • Economics & Politics

Shell and ExxonMobil, each with an interest of 50% in NAM, will waive a claim against the State for the gas that remains in the ground after the extraction has ended. Furthermore, the two oil companies offer guarantees that NAM can and will always pay for earthquake damage and the reinforcement of buildings.

This is evident from the agreement in broad lines that Minister Eric Wiebes of Economic Affairs and Climate has concluded Monday with Shell and ExxonMobil about gas extraction from the Groningen field. It is expected that around 450 billion cubic meters of gas will remain in the ground after the extraction. At the current gas price, this represents a value of around € 70 billion.

Sustainable

The NAM does not have to pay less to the government. Until now, the State received 90% of the proceeds from the Groningen field. Due to the declining gas production and the increased costs of damage and reinforcement, the current so-called payment scheme is ‘no longer tenable’, according to the minister.

“It could be that if the policy is unchanged, more than 100% of the proceeds would go to the State in the future. The NAM would then make a loss. “That should not be expected from the oil companies,” says Wiebes. That is why 73% of the profits from the Groningen field will now accrue to the State. That percentage already applies to all other gas fields in the Netherlands.

Rolf de Jong, chairman of the Executive Board of ExxonMobil Benelux, talks about ‘tough discussions’, which have led to an inevitable and necessary agreement, ‘which we fully support’. According to him, the percentage of 73% is sufficient to keep the field ‘running’ until 2030.

NAM will not pay a dividend for the financial years 2018 and 2019. After that, the company will only pay out a dividend if it is sufficiently financially robust, as stated in the agreement.

To zero

According to the minister, agreement is ‘aimed at reducing the gas production from the Groningen field to zero in a responsible manner as quickly as possible’. Earlier, he announced that it must be done in 2030 gas extraction from the Groningen field.

‘With the agreements, the State will take control of gas production completely, while NAM will remain financially responsible for damage and reinforcement’, according to a statement from the Minister. ‘Important for the Groningers of this agreement is that the damage is paid at all times,’ according to Wiebes after a press conference in The Hague.

Marjan van Loon, CEO of Shell Netherlands says that there is now clarity. ‘Promised is promised is promised’, she says about the earlier promised oral guarantee about the damage payment to the Groningers. “It is now also on paper,” says Van Loon in The Hague.

Liability

However, the legal liability of gas extraction from NAM is shifting to the government. That was an important negotiating point for the oil companies. They could no longer be prosecuted for the consequences of gas extraction in the future.

This is being challenged by lawyer Emile van Reydt of Spong Advocaten, who is in the process of preparing a criminal case against NAM. “This has no consequences for the current case,” says Van Reydt. “Civil liability can go to the State. But NAM can not escape criminal law. ‘

Perspective

The declaration also states that the government and the region are working on a new future perspective for Groningen ‘to strengthen the economy and liveability in the region’. Part of the agreement is that NAM will make a contribution of € 500 million. The Cabinet also wants to make € 500 million available for Groningen. ‘This means that for the future perspective for Groningen a total of at least € 1 billion will become available’, according to the statement.

The State wants to set up a separate fund for dealing with earthquake damage, according to the agreement. There is nothing about amounts. According to estimates, the strengthening of tens of thousands of houses in the province that suffer from quake damage will cost many billions. Some valuations assume more than € 20 billion.

‘Due to the declining gas extraction and the increased costs of damage and reinforcement, the current so-called payment scheme is no longer tenable’

• First, the State received 90% of the proceeds. That is 73%. So Shell and ExxonMobil can earn more.

SOURCE

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