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Groningen output must be 'more weather dependent'

9 Feb 2018, 11.43 am GMT

Groningen output must be 'more weather dependent'

London, 8 February (Argus) — Gas production from the Netherlands' Groningen field will become more weather dependent and will be cut more sharply in years that are warmer than average, economy minister Eric Wiebes said.

The Dutch government has abandoned the concept of an output cap that determines how much is produced in a gas year, regardless of whether lower output may be sufficient to meet northwest European low-calorie demand, Wiebes said in a second chamber debate yesterday.

The government will "no longer be focused on a figure, but on a minimum", Wiebes said.

This means that in a gas year with a mild winter or a warm summer, production will have to be lower than in an average year, Wiebes said.

Under the production plans for recent gas years, an output cap was set partly based on how much offtake would have been required to meet low-calorie demand in an average gas year as determined by system operator GTS. But production in line with this limit was allowed in years when warmer-than-average weather pared northwest European low-calorie consumption, while offtake in excess of the cap was permitted in particularly cold years.

The government set an output cap of 21.6bn m³ for the 2017-18 gas year, with additional production of up to 5.4bn m³ allowed if there are more than 2,370 heating degree days over the year.

But Wiebes has called for aggregate output this gas year to remain considerably lower than 21.6bn m³ to help reduce seismic activity in the region. GTS had said that cumulative output of 19.5bn-21bn m³ may be sufficient provided degree days over the remainder of the year are in line with the long-term average. Degree days in October-January were well below average, which could allow for aggregate production over the gas year to remain below 21.6bn m³.

More extensive use of quality conversion sites could allow for Groningen output to be ramped down in mild periods in winter and during the summer months, which could make sharper cuts in aggregate production over the year possible. But operating the facilities at maximum capacity would require offtake from the field to respond more flexibly to spikes in demand.

Operator Dutch firm Nam has been required to keep output as flat as possible to minimise the earthquake risk. But the state supervision of mines (SODM) said last week that sharper fluctuations in aggregate offtake may be permitted, if variations in production from different regions of the field are restricted.

Using Groningen as a flexible supply source while operating quality conversion sites consistently close to maximum capacity could reduce TTF day-ahead volatility.

Stronger offtake could limit support for TTF prompt prices on days when the weather is cold, while weaker production could buoy prompt markets on mild days.

GTS said last week that Groningen production of 14bn m³ could be sufficient to guarantee security of northwest European low-calorie supply in an exceptionally warm year. But offtake of 20bn m³ would be required in an average gas year, it said.

SODM advice must be followed 'without ifs or buts'

SODM had advised the government to reduce production from the field to 12bn m³/d "as soon as possible" to minimise seismic activity in the region, following an earthquake in Zeerijp in January that was the strongest in the area since 2012.

And the government will follow the advice "without ifs or buts", Wiebes said yesterday.

Prime minister Mark Rutte said last week that the government is "obliged" to follow the supervisor's recommendations.

The ministry aims to present scenarios on future Groningen production later this quarter. These will detail how quickly output can be reduced to 12bn m³/yr, Wiebes previously said.

And they may include longer-term scenarios that could foresee production eventually being brought down to zero, he said.

The scope of possible output cuts will partly depend on the maximum utilisation rate at which GTS can continuously operate its nitrogen ballasting facilities that are used to convert high-calorie gas into low-calorie supply, the system operator has said. A continuous utilisation of around 85-100pc may be possible, but this would partly depend on whether there are any technical disruptions, GTS said.

Wiebes stressed again yesterday that building a new facility — which would increase maximum conversion capacity and could so allow further cuts to production — is considered a "very serious option". A decision on whether to construct an additional nitrogen ballasting plant in Zuidbroek will be made in late March, Wiebes said.

But even if such a decision is taken in the next few months, the site may not become operational before the first quarter of 2022, GTS said.

The government is investigating options that could allow for low-calorie demand to be reduced in the next few years. These include the possibility of switching some of the Netherlands' industrial low-calorie consumers to other sources of supply such as high-calorie gas or renewable energy.

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Groningen output for sale mn m³/d

Utilisation of Dutch nitrogen ballasting sites %

Supply converted through nitrogen ballasting and enrichment GWh/d

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