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Irina Slav

Irina Slav

Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.

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An Unsolvable Natural Gas Dilemma

Rig

Natural gas isn’t the first thing that comes to mind at the mention of the Netherlands. Clean energy is a more likely association. And yet gas is at the center of one of the country’s major headaches. At the heart of the problem is the giant Groningen gas field that, when it was discovered in 1959, was the largest gas field in the world.

Since then, Groningen has produced hundreds of billions of cubic meters of gas and has, in the meantime, significantly increased seismic activity in the area. This increase in seismic activity has damaged thousands of homes and eventually led to a gradual production cut that is still underway. Unfortunately, the production won’t solve the earthquake problem and the gas from Groningen is difficult—and expensive—to replace.

After the latest earthquake in the area of Groningen, which occurred earlier this month, the operator of the field, NAM, said further cuts were necessary, but added that these won’t put an end to the quakes. The reason: any fluctuation in production is conducive to heightened seismic activity.

The government seems determined to phase out Groningen as fast as possible, but it faces a couple of major challenges in doing that. First, the Groningen field produces low-calorie natural gas and almost all Dutch households use it, which means the distribution network has specifically been developed for this type of gas. All heating appliances and systems in the country were designed with this quality of gas in mind.

Second, converting imported, higher-calorie gas into the kind that household appliances work with in the Netherlands is an expensive process, and the existing conversion facilities are running at capacity. Building more will take years and hundreds of millions of euros.

Now, the government has warned 200 large companies in the country to start thinking about how they will switch to alternative energy sources within the next five years, so by 2022 there should be no Groningen gas going to industrial users.

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Last year, the Netherlands generated a tenth of its electricity from wind and solar installations. This should rise to 14 percent by 2020. But that’s a small consolation when it comes to Groningen. Whatever the source of electricity, using it instead of gas will require the electrification of a lot of heating systems.

The ultimate solution would involve both reducing demand for gas and switching to alternatives. Yet lowering demand would be difficult, too, especially over the short period that the Dutch government has in mind. No wonder then that last November, a court said that the government had failed to make it clear how it would lower demand for gas to facilitate the phase-out of Groningen.

Yet, even when gas production at the field stops, this will not stop the quakes, it seems, so any solution would be far from perfect. Sure, the businesses will get renewable energy incentives and they will be forced to make the shift, but the quakes are likely to continue. The state prosecutors are investigating NAM—a Shell/Exxon JV—for failing to conduct risk assessments after 1993 when the link between gas extraction and the tremors was discovered. But fixing the blame won’t get the Netherlands any closer to fixing the problem.

By Irina Slav for Oilprice.com

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  • David Middleton on January 25 2018 said:
    Groningen field
  • David Middleton on January 25 2018 said:
    Groningen gas field is onshore.

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