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    From the editor: Goodbye Groningen [Gas in Transition]


The field's remaining 450bn m3 of gas is very likely to stay in the ground forever.

by: NGW

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From the editor: Goodbye Groningen [Gas in Transition]

The Netherlands held a symbolic ceremony to mark the permanent closure of the giant Groningen gas field on April 19, following its Senate’s approval of a law. This means that the field’s estimated 450bn m3 of remaining gas  – 50% more than the EU’s total gas consumption in 2023 – is very likely to stay in the ground forever. 

The reason for the shutdown is all too well known. Production at Groningen, which peaked at more than 80bn m3 of gas annually in the mid-1970s, caused earthquakes. While these quakes did not result in any deaths or physical injuries, they did cause more than €1bn of damage to buildings over the decades. The Dutch government committed in 2014 to its phased closure by 2030. But this timeframe was later brought forward. In the year ending September 30, 2023, its output was capped at a mere 2.8bn m3.

Groningen was then kept on standby for some months to cover any shortages in the event of cold weather. Fortunately for Europe, the continent enjoyed yet another mild winter, and the field was considered not needed. 

There were some politicians that fought against Groningen’s closure, mainly hailing from the rightwing, who argued that the move put national energy security at risk. However, all they managed to achieve was a short delay to the Senate’s vote. All the large parties came out in support.


More imports

Once a major exporter, the Netherlands will now rely on imports – primarily pipeline gas from Norway and LNG – to cover three-quarters of its demand. But the government’s assessment was that the country’s security of supply would only be in jeopardy in the event of two very cold winters in a row.

There are limited prospects for production growth elsewhere in the Netherlands. The government has already limited permissions for further oil and gas drilling, and a 2019 court ruling on nitrogen emissions has made it harder to advance projects in various industrial sectors, including hydrocarbons.

Security of supply is one thing, but another is cost. Without Groningen, the Netherlands will be left paying more for gas for years to come. And natural gas still accounts for around 40% of the country’s energy mix, meaning this will have significant implications for power and heating bills. The country wants to expand the role of renewables to 70% of the power mix by the end of the decade, from 35-40% at present, but at the same time, gas will be needed to phase out coal’s lingering 10-15% share.

Then there is the broader impact on government revenue. Since production started in 1963, Groningen has contributed €363bn ($385bn) to the Dutch treasury. The field’s operators, Shell and ExxonMobil, made €66bn in profit over the same period. They have asked an arbitration court to determine if they can seek compensation from the Dutch state for Groningen’s early closure. The outcome could add a further expense for the government.

On the European level, the closure leaves the EU even more dependent on gas imports. In 2023, the bloc’s reliance on foreign gas rose to a record high of more than 89%, as indigenous production dropped 18% year/year, outpacing the 8% fall in demand. With no major new fields due online until Romania’s Neptun Deep in 2027, and with consumption likely to rebound as a result of lower prices, import dependency will grow further.

Cuts in Groningen’s production have been a key contributor to this trend in recent years. But so too has been antipathy to upstream development across Europe. The EU may well have reduced its dependence on Russia and its weaponised gas supply, but too much reliance on Norway and the US also poses risks, such as unplanned disruptions.


No political will to keep it open

NGW had argued in September 2022, at the height of the energy crisis, that increased flow at Groningen, if done in a way to avoid seismic activity as much as possible, might have helped ease soaring gas prices in both the Netherlands and Europe at large. At prices as high as they were back then, the extra gas supply could have earned tens of billions of income per year, and some of that could have been dispersed to the affected population in the area. This could mean each Groningen citizen getting tens of thousands of euros if they had received a reasonable share of rent from the field, which could have been used to fortify homes and cover any potential damage from future quakes that might happen despite precautions. Such a level of compensation would have been hard for many to turn down.

But it is understandable that such a political initiative never emerged. After the government had spent many years denying that the field caused earthquakes, there was a deep lack of trust among locals. And while some in government may have considered such an initiative, they also knew the huge political risk in proposing it. The initiative had to have come from community leaders in Groningen, but it didn’t.