Industry Trend Analysis - Groningen Cap Rattled By New Quakes - MAR 2018

BMI View: Further seismic activity at the Groningen field in the Netherlands will place increasing social and political pressure to accelerate production cap reductions. Calls to reduce the cap further will be countered by the need to ensure security of gas supply to the Dutch market, with the government facing a future import burden.

The Dutch Economy Ministry has committed to a 10 percent cut to the existing rate to a new annual rate of 21.6 billion cubic metres (bcm) of production for the year through October 2018, whilst also pledging it would further reduce production to 20.1 bcm by 2020. The decision fell days before another strong earthquake hit the Groningen area, measuring 3.4 on the Richter scale, which inflamed social and political opposition to the ageing gas field, with renewed calls to accelerate the caps to production. Whilst we maintain that the ministry is unlikely to advocate for any major reduction to the cap due to the country's ongoing reliance on the field for domestic consumption, with mounting environmental risk and political and social pressure, it is probable that the ministry may be forced to take a more hawkish stance on Groningen.

Questions Over Energy Security

Seasonal Swings No Longer In Play
Groningen Gas Production, bcm
Source: Bloomberg

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