AMSTERDAM/LONDON: The Dutch cabinet has decided to cut gas production at Groningen, one of the world’s largest gas fields, by 15 to 20 percent a year, several industry sources said, after a series of earth tremors worried local residents.
The sources and local media said on Friday the cabinet had discussed slashing production to 42.5bcm this year and next, down from over 50bcm in 2013.
A government spokesman said Economics Minister Henk Kamp would make an official announcement at 1530 GMT. Gas from Groningen is sold mostly to utilities and large industries in the home market, although some gas is piped to Germany, Italy, France and Britain.
The government earns about ¤12bn ($16.3bn) a year from the sale of gas from Groningen, according to the finance ministry. “If we extract less gas, that has a cost,” Finance Minister Jeroen Dijsselbloem told Dutch broadcaster NOS.
The market has been expecting a decision to cut production, which has already driven up gas prices, analysts said.
“The decision is overall bullish for gas prices, but contracts did not move much today as the market already priced the news in earlier this week,” said Oliver Sanderson, senior gas analyst at Thomson Reuters Point Carbon.
Dutch wholesale gas prices for delivery next winter have risen by 65 euro cents since the start of the week. They traded at 27.78 euros per megawatt-hour (MWh) at 1300 GMT yesterday, only slightly higher than the opening value for the day.
Production from Groningen amounted to 53.8bcm in 2013, mainly due to an unusually long and cold winter. The annual outlook to 2020 was previously for around 49 bcm.
Local residents and some politicians have called for a halt or review of gas extraction in Groningen province following a series of earth tremors, some of which cracked buildings.
The gas field near Slochteren in the north of the Netherlands is operated by a joint venture between Royal Dutch Shell and Exxon Mobil called Nederlandse Aardolie Maatschappij BV.
Gas from the field goes to GasTerra, a Groningen-based international company that trades in natural gas. Discovered in 1959, the Groningen gas field has been expected to continue to pump natural gas for at least another 50 years.
Reuters
