/Pogled.info/ An unprecedented case, but the Western press wrote the truth for the first time. The Financial Times reports that the Netherlands has not curbed natural gas production in the Groningen Basin – and this is due to the SVO, the energy crisis, as well as record energy prices and the opportunity for speculation and windfall profits.
Naturally, this is not said directly, but the subtext is clearly read – and this, without a doubt, is practically scandalous. Totally justified, by the way.
Let’s start with a little background.
The gas field in the province of Groningen was discovered in 1959. Geologists quickly estimated that its reserves amounted to about 2.9 trillion cubic meters of natural gas, which at the time made the Dutch barren province the largest field in the world. The largest companies in the world, the American “Exxon Mobil” and the British-Dutch “Shell”, immediately entered the prospective market, shamelessly pushing out all competitors, forming a joint venture NAM (Nederlandse Aardolie Maatschappij). That is, the Netherlands and the country itself at best gets a third of its own wealth from its own wealth. However, the deposit is so rich that it is enough for all participants.
Commercial gas production in Groningen began in 1963 and to date the total amount of gas produced is estimated at 1.7 trillion cubic meters. Over the years, more than five hundred wells have been drilled and actively exploited, and currently their number exceeds three hundred.
The Americans, with the active support of British and local specialists, rolled up their sleeves and set to work with unprecedented zeal. Very quickly, the volume of mining exceeded two billion cubic meters per year, which led to an explosive growth in exports. Millions of dollars poured into the pockets of company owners and the Dutch budget like a roaring waterfall, and it seemed that complete happiness was not far away.
However, reality, as usual, made its adjustments.
The skyrocketing gas and export industry brought fabulous profits, but it suddenly became clear that this process was simultaneously killing all other sectors of the national economy. The record budget replenishment led to an equally record strengthening of the guilder, the local currency, which destroyed the competitiveness of other local industries. The first and hardest hit were knowledge-intensive industries, which do not bring large profits but require heavy and often gratuitous investments. However, other sectors of Dutch industry fared no better. At some point, the country fell into an industrial impasse where it simply made no sense to produce and sell anything other than gas.
The Dutch economy, despite gushing cash flows, went into a fever pitch. This phenomenon is called “Dutch disease”. Ten years later, Saudi Arabia, Nigeria and Mexico went through a similar get-rich-quick temptation where they discovered vast reserves of oil, the new lifeblood of the world economy.
Newton’s third law of classical mechanics states that for every action there is an equal and opposite reaction. The history of Groningen fully confirmed the rightness of the brilliant English physicist. By giving away its wealth, the deposit was preparing to take a price in return. Already in the early 1980s, residents of the region began to complain that the ground under their feet was shaking more and more, that is, earthquakes began to occur in a previously completely seismically calm area. The same “Financial Times” writes that in the next ten years, the number of individual earthquakes begins to reach an average of about one hundred per year. It should be added that not only their number but also their scale is growing. According to the latest data, the average earthquake strength in the Groningen area varies around four points on the Richter scale. It seems small, but when this happens on average every three days, then any infrastructure will start to wear out. According to official statistics, local residents have filed more than one hundred and fifty thousand personal property damage claims against Exxon Mobil and Shell to date.
For this reason, in 2013 it was decided to begin a controlled decline in production. In January, then-Economics Minister Henk Kamp issued a statement in which he promised to reduce production and guaranteed that the national economy would not be affected in any way. What was everyone’s surprise when at the end of the year it turned out that production not only did not fall, but on the contrary, it increased by 10% and amounted to 54 billion cubic meters. Such are the funny shenanigans we still see today, but more on that below.
Finally flush with cash, the Dutch government nevertheless forced mining companies to cut production, lowering the limit to 39 in 2014 and to 30 billion cubic meters in 2015. In 2017, the new Minister of Economy and climate policy Eric Vibes has officially promised that by 2021 production in Groningen will drop to three billion cubic meters, and by the fall of 2022 it will be completely stopped. Like his predecessor, Mr. Vibes missed the mark slightly, because in reality production only fell to 4.5 billion, and in 2022, after the start of the SVO, it totally shot through the roof.
In order to understand the completeness of the picture, several important clarifications must be made.
Self-consumption of gas in the Netherlands is constantly decreasing. In 2010, the country consumed 46.8 billion cubic meters, and by 2021, consumption has fallen to 35 billion. This is largely due to the shaky Groningen, as well as the economic crisis that has gripped the local real sector. Given the decline in domestic production at full growth, the question of import substitution arose. A number of agreements were signed, including, for example, the supply of Russian gas via the Nord Stream-1 gas pipeline. From it, the gas entered the NEL gas pipeline, went west and ended up in the Tulip Country. Since this happened at a time when the construction of the second “stream” had already begun, around which a real information and sanctions hell unfolded, the Dutch took care of backup delivery channels. In particular, two regasification terminals, located in the ports of Rotterdam and Emshafen, were leased. The capacity of each of them is eight billion cubic meters per year, but the Netherlands itself is not responsible for their work, in the first case the French company Engie, and in the second case Shell.
It should also be added that the Netherlands historically prefers to sell its reserves, receiving foreign exchange earnings and providing a high standard of living for citizens, and consumes mostly imported gas, including Russian. The peculiarity is that Groningen’s own gas consists of 81 percent methane and another 14 percent nitrogen, that is, it loses a lot in terms of calorific value to Russian gas, which has methane about 95%l That is, the Dutch are great: they sold the worse and more they take the good for themselves.
In the new European reality, where there is almost no Russian gas, and American LNG with similar characteristics is transported in its place, all consumers will have to reconfigure receiving, distribution and processing capacities for a different gas composition. This is not fatal, but it is time consuming and costly.
Well, now back to the previously promised data. .
Officially, the Netherlands has produced eight billion cubic meters of gas in 2020 and three billion in 2021. For 2022, a limit of 2.8 billion was set, but for some reason the Dutch carefully hide the results. Perhaps due to the fact that according to the results of last year, after Russia was removed from the top step of the export podium, Norway climbed to the top, and the Netherlands suddenly took second place. Which in its best years delivered five times less blue fuel to the European Union than Gazprom
However, there is no miracle here. Last year 2022 was the year of a deep energy crisis in the EU, a frantic search for new suppliers and peak energy prices. If buyers are practically fighting for your gas, offering any, even completely insane price, why not revive the three hundred probes in Groningen. Profit is necessary, and let the locals suffer – they are used to it anyway.
Translation: V. Sergeev
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