June 22, 2015 / 2:21 PM / 4 years ago

UPDATE 2-Output at Groningen gas field to be capped at 30 bcm in 2015 - Dutch news agency

* Gas prices climb on production cut at Groningen field

* Cap equals reduction of 3bcm for second half of 2015

* Formal government decision expected this week (Adds price rise, quote, details)

By Anthony Deutsch

AMSTERDAM, June 22 (Reuters) - Dutch Economy Minister Henk Kamp will propose a further tightening of production at Groningen, Europe’s largest gas field, the Dutch news agency ANP reported on Monday, sending European gas prices higher.

Output at the gas field, the world’s 10th largest, will be capped at 13.5 billion cubic metres (bcm) in the second half of this year and at 30 billion bcm for the whole of 2015, ANP said.

In February Kamp had ordered production to be cut to an annualised rate of 33 bcm for the first half of the year, from 39.4 bcm previously, after the Safety Board said gas companies, regulators and the government had all failed to take the threat of earthquakes seriously enough.

The report of a production cut of 3 bcm in the second half of 2015 led to a tightening of liquidity on the Title Transfer Facility (TTF) gas hub and sent prices in Europe higher.

A government spokeswoman declined comment on the figures. A formal decision was expected on Friday. A spokesman for the NAM Shell /Exxon Mobile joint venture, which exploits the Groningen field, was unavailable for comment.

Speculative buying by banks and traders drove gas prices higher on Monday, despite weak underlying fundamentals in regional gas markets, which are heavily oversupplied.

“There are no numbers to click on the TTF,” one trader said, referring to a trading platform that enables buying or selling of gas at the Dutch gas trading hub.

“It seems like every trader is waiting, nobody wants to offer, they are waiting to see which way the market will move.”

Dutch gas prices at the TTF hub were higher in early afternoon trade. The July contract was up 1.48 percent at 20.60 euros per megawatt hour, while the September contract gained 1.63 percent, also to 20.60 euros/MWh.

The NBP Winter 2015 contract rose 1.9 percent to 48.65 pence per therm while the 3Q 15 contract climbed 2.7 percent to 43.50 pence per therm.

The ANP report, citing anonymous sources in The Hague, said the latest decision was based on a projection that temperatures will remain mild this year and that demand can be met by tapping 3 bcm in overcapacity at the Norg storage facility in Drenthe.

In a conflicting report, local television channel RTV Noord said Kamp would propose a production cap of 33 bcm. (Additional reporting by Oleg Vukmanovic in Milan Nina Chestney in London and Toby Sterling in Amsterdam.; Editing by Mark Heinrich)

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