March 29, 2018 / 1:44 PM / 3 months ago

UPDATE 1-Netherlands to halt gas production at Groningen by 2030

(Updates with details, quotes; gas price reaction)

By Stephanie van den Berg

THE HAGUE, March 29 (Reuters) - The Dutch government said on Thursday it will phase out gas production at the Groningen field, once Europe’s largest, by 2030 as part of efforts to reduce the danger caused by small but damaging earthquakes.

Production is set for 21.6 billion cubic metres (bcm) this year, already down from a peak of 53.8 bcm in 2013, following a series of cuts as decades of extraction have led to dozens of earthquakes each year, damaging thousands of homes and buildings.

“Our intention is (to cut production) to get towards 12 bcm in the coming four or five years, and to zero at the end of the coming decade,” Prime Minister Mark Rutte told a press conference.

A chart produced by the Dutch Economy Ministry showed production falling to below 20 bcm for the production year beginning October 2018, and to below 17.5 bcm for the 2019 year, assuming average temperatures.

Economy Minister Eric Wiebes confirmed there will be reductions in both years, but will not make his official decision on production until he has received advice on safety considerations this summer.

Wiebes said the cuts will be achieved in part by forcing large industrial users to seek other sources of energy by 2022. In addition, the Netherlands is building a conversion plant to make high-calorific foreign gas suitable for use in Dutch systems.

Foreign users of Dutch gas in Germany and Belgium will be encouraged to seek other sources, and their contracts not renewed, while Dutch households will be incentivized to reduce gas use and switch to non-gas heating systems.

Dutch wholesale prices at the TTF hub were little changed after the statement — both the summer 2018 and winter 2018 contracts were up less than one euro cent, trading at 18.23 euros per megawatt-hour (MWh) and 19.02 euros/MWh respectively.

“This is in the neutral to slightly bullish range,” said Oliver Sanderson, a Thomson Reuters gas analyst, of the government’s base case scenario. “Our view for this gas year (Oct 2017-Sept 2018) is around 19 bcm.

“However, the Groningen quota should continue to be seen as low and a general cause of price spikes in cold weather,” he said, noting that storages have been depleted after a cold 2018 winter.

The government said last month that it intended to cut production at the field from current levels of 21.6 bcm per year to 12 bcm as quickly as possible, after the country’s northern region was hit by the strongest earthquake in years in January. (Reporting by Stephanie van den Berg, Toby Sterling, Bart Meijer and Sabina Zawadzki Editing by Susan Fenton)

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