London — A large earthquake in the Dutch province of Groningen early Wednesday has raised the prospect of an acceleration of the phase-out of gas production at Europe's biggest onshore gas field.
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The 3.4 magnitude earthquake hit the northern Dutch village of Westerwijtwerd close to the giant Groningen gas field early Wednesday, the Dutch meteorology institute KNMI said.
It was the worst tremor at Groningen since January 2018 when another 3.4 magnitude tremor hit, at that time triggering moves by the Dutch government to phase out production at the field by 2030 at the latest.
The Dutch economic affairs ministry said Wednesday it was already looking at ways to accelerate the phasing out of production at Groningen -- operated by Shell/ExxonMobil joint venture NAM.
"The earthquake once again underlines the need to stop gas extraction [at Groningen]," a spokesman at the ministry told S&P Global Platts Wednesday.
"We are working hard on that. We are ahead of schedule: we are already extracting less this year than we had agreed last year. And we continue to look for additional measures to speed up the pace."
Wednesday's quake could put more pressure on the government to move to close Groningen much earlier given the strength of public opposition.
"I think it is likely to accelerate even further the phase-out of gas production," Jonathan Stern, leading gas analyst at the Oxford Institute for Energy Studies, said Wednesday.
"It will be difficult for government to control the inevitable negative reaction which will follow." Adrian Dorsch, analyst at S&P Global Platts Analytics, agreed that pressure would likely be put on the Dutch government again following the most recent tremor, but he said there was only so much the state could do.
"There is limited downside to production without putting Dutch security of supply at risk, suggesting that any permit change to the downside will be limited," Dorsch said.
A production cap has been in place for a number of years to limit the impact of earthquakes linked to gas production at Groningen, with the quota for the current gas year (October 2018-September 2019) set at 19.4 Bcm. That is down on the quota for the Gas Year 17/18 of 21.6 Bcm.
The proposed quota for the next gas year -- starting in October 2019 -- is 15.9 Bcm, significantly down on the field's recent production peak of 54 Bcm in 2013.
The economy ministry, headed by Eric Wiebes, has also suggested output could dip to as low as 4 Bcm/year by 2022.
Any immediate accelerated reduction to Groningen production would have a major impact on the European gas market, further increasing Europe's growing dependence on gas imports.
Calls for immediate action to limit the risk of quakes were already being made across the Netherlands on Wednesday.
Rene Paas, the Dutch King's Commissioner in the Groningen province, said it was clear gas production at the field was "still not safe."
"Gas extraction must be phased out more quickly, the damage dealt with faster and the reinforcement [of buildings] accelerated," Paas said in a statement.
The Dutch regulator, the State Supervision of Mines (SodM), said Wednesday that the strength of the earthquake triggered the protocol for possible intervention to be activated.
"In view of the gravity and duration of the quake, NAM has indicated that it will provide an analysis to the SodM within 48 hours," the regulator said.
NAM director Johan Atema said Wednesday he was "shocked" by the earthquake and confirmed NAM was working on an analysis in accordance with Groningen protocol and would send its first analysis by Friday.
European gas prices were up 2% in early trading Wednesday, with the TTF June price at around Eur12.90/MWh by 1000 GMT, though traders attributed the increase also to a rise in carbon prices. The contract dropped back in later trading.
One trader doubted whether the Groningen quota would be reduced further given that the operator has already cut production "a lot."
Shell has already written down to zero its net investment in NAM due to the phasing out of production by 2030, potentially leaving some 450 Bcm of gas in the ground.
The Dutch Council of State, the country's top administrative court, expects to rule in mid-July on 26 appeals against the government's production policy at the Groningen field.
The court in January rejected two emergency requests calling for production to be halted completely because of the risk of earthquakes.
A spokesman for the court on Wednesday said it had not received any new appeals following the latest earthquake."
Besides, the term of appeal has ended," he said.
The Netherlands might also find it difficult to wind down production much sooner as it is restricted by limited capacity to convert imports of high-calorific gas (H-gas) into low-calorific gas (L-gas) used across the country.
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