Dutch Govt. to Halt Gas Output in Part of Groningen Field

 

In a preliminary ruling on Tuesday, the Council of State ordered the government to a halt production around the village of Loppersum in the northern province of Groningen, where the gas field is located.

 

It stopped short of imposing the full block on production in the gas field that complainants had sought.

 

Loppersum production was previously capped at 3 billion cubic meters (bcm) for 2015, representing roughly 9 percent of overall output from Groningen.

 

"For the time being, gas may be extracted in and around Loppersum only if extraction from other locations is no longer possible and if necessary for the security of supply," a court statement said.

 

"If production were stopped in full, demand for gas from the Netherlands and neighbouring countries could not be met," the judge said.

 

Dutch gas production makes up about 15 percent of Europe's total, and profits from the field supply roughly 5 percent of the government's revenues.

 

Judge Thijs Drupsteen said he was ordering that the government's approval of the extraction plan submitted by NAM, a joint venture between Royal Dutch Shell (RYDAF) and Exxon Mobil Corp., be "partially suspended".

 

Economics Minister Henk Kamp said he would implement the ruling "as quickly as possible", adding output would be reduced to the minimum trickle needed to keep the field operable.

 

Production will be all but halted, he said, with output reduced to the minimum trickle needed to preserve the field and allow it to be reactivated in the interests of supply security.

 

Production at Groningen has become increasingly controversial since the Dutch Safety Board found in February that the government failed adequately to consider the threat to citizens from the small, but damaging earthquakes.

 

The ruling was preliminary and based on complaints filed by two out of 40 applicants. The cases will be heard in full in mid-September, the court said.

 

Henk Scheffer, representing complainants, called the decision a "moral victory" although it leaves the door open for the government to maintain overall production at current levels.

 

He said Kamp will have to consider safety concerns when making his next decision about production at Groningen in July or the court will intervene more forcefully to cut production.

 

Gas traders said the decision's limited immediate impact came as a relief, although worries of future gas cuts persist.

 

"All gas bids have dropped," one trader said.

 

UK gas contracts for May delivery were down 1.4 percent at 45.95 pence, when they had traded as high as 46.85 pence before the decision.

 

The judge ordered production stops at the 't Zandt, Overschild, De Paauwen, Ten Post and Leermens clusters "which are the areas known to be at greatest risk of earthquakes."

 

Small volumes of gas may be extracted only to keep the clusters open so they could be restored in case of an emergency.

 

The lawsuit formally challenged minister Kamp's decision to set 2015 production from Groningen at 39.4 billion cubic metres (bcm) of gas - a decision he is already reconsidering.

 

In February Kamp cut first half 2015 production to 16.5 bcm, sending gas prices surging in Northwest Europe. The overall annual target for the year is still to be confirmed in July.