50 years of Groningen gas

Toespraak | 17-06-2009

Speech Ms. M.J.A. van der Hoeven, the Netherlands Minister of Economic Affairs, at the conference marking 50 years of Groningen gas, 16 June 2009

Your Majesty, Ladies and Gentlemen,

It is a delight to be here today and join you in celebrating 50 years of Groningen gas.
This golden anniversary gives us plenty of reason to look back and be proud of what has been achieved since 1959.
Following the Groningen find, the Netherlands quickly emerged as a leading European gas nation. There is no need to be humble here. Our performance as a gas producing country has over the years been absolutely world class.
Yet, in the early days, predictions failed to do justice to the magnitude of the development effort that was to take place.
Estimates set the total volume of gas to be found in Slochteren at around 60 billion cubic metre. This was soon raised to 150 billion. But even that would prove far off the mark. Up till now 1800 billion cubic metres have been produced from this field alone, with another approximately 950 billion left for future exploitation.
At the time, my predecessor as Minister of Economic Affairs, Mr Jan Willem de Pous, was keen to maximise the benefits of the gas discovery for the national economy.
And he did a very good job…
Bearing in mind the need to promote common prosperity in the best way possible, he designed a gas structure based on public-private cooperation. This structure, which is still intact today, is referred to as the 'gas building'.
It entails the best of both worlds, joining the public and private spheres of interest:
- it has generated a stable income by exploring Dutch mineral wealth, and at the same time:
- it has resulted in an attractive return on investments for the oil majors involved (Shell and Exxon), whose expertise has been crucial for the exploitation of our national gas resources.
The gas building has so far stood up to the test of time.
However, the question is whether our 'gas building' can stay unchanged in today's world. Energy markets have in the mean time been liberalised. They have also become politicised. This may require reconsidering our institutional arrangements.
Evidently, in the course of time some renovation work will have to be done.
Of course, this presents us with a great many issues that we need to look into more thoroughly. And since the gas building is a public-private construct by nature, we will need to do so together, carefully balancing all interests at stake.
At all times, let's avoid bleakness about our future position. Of course, we will no longer be a net-exporter of gas in about fifteen years, that is true. Yet, we will evidently still produce gas for another 50 years. Our gas industry will remain of major importance for many decades to come.
We are now in a transitional phase, developing a new role in the global gas market. Ever more so, the Netherlands will emerge as a gas trading country.
Our overall aim is to strengthen our position as a gas roundabout for North West Europe, a gas hub that will contribute to safeguarding energy security at home and abroad.
The Dutch gas roundabout - taking shape already - will provide gas storage capacity, transport capacity and trading facilities. Flexibility, transparency and state-of-the-art technology are key elements of the gas roundabout we envisage and vital to its success.
I am sure we can hold on to our strong position in the world of gas and do so with confidence, provided we show ourselves to be responsive and flexible to change.
That means looking for new partnerships and creating new business opportunities.
I can tell you: our point of departure for realising our ambitions is an excellent one.
By setting up the gas building, we have acquired riches way beyond the billions of cubic metres of gas that have been extracted. Through years of experience we have accumulated vast knowledge and expertise in the field of gas, we profit from solid business structures and, equally importantly, we have developed a burning ambition to help shape Europe's future gas market.
Let me return to Groningen. First of all, we must count our blessings. The Groningen field has significantly contributed to the economic development and welfare of our country.
Total revenues now stand at EUR 160 billion. They have boosted our economy considerably, although they also flattered our overall economic performance sometimes. The expression Dutch Disease still points to the period when our overall economic performance was overrated, only because there was a stable source of income from gas production. But we have learned from that in the course of time.
As I said before, we are now in a period of transition. This also involves the functioning of the Groningen field. Its swing capacity is diminishing. At the moment, we are still able to provide extra capacity whenever the production of small field falls short of demand. But the Groningen field will eventually cease to function as a swing producer altogether, developing into a baseload producer instead.
At the same time, we need to accelerate and optimise the exploration of small fields so long as the infrastructure still permits us to do so.
Financial measures to this end are currently being reviewed by Parliament. Also, I am confident that negotiations with NOGEPA on the fallow acreage covenant will have fruitful results, stimulating the exploration and exploitation of small fields and prospects within the next few years.
However important they are, indigenous supply volumes will inevitably come down. Additional gas has to come from abroad.
We all know that competition on scarce resources is strong and markets are tight. Except perhaps in periods of recession. Companies have to be alert, looking out for new suppliers and developing relationships with partners across the globe.
This will affect our traditional utilities: they will have to comb international markets as well, preparing for the further depletion of Dutch reserves.
Already, GasTerra sells the larger part of Dutch natural gas to parties abroad, on the basis of long term contracts. Domestic parties will have to get used to doing business with foreign suppliers besides GasTerra.
Our overall policy is one of diversification, dealing with a wide range of suppliers and focusing on a variety of gas types, LNG and 'green gas' prominently among them.
It is important for producing and consuming countries alike to maintain a continuous dialogue, within the IEF, for instance. In addition, we are working hard to establish good contacts with gas producing countries individually, in order to break the ground for bilateral contacts and contracts between companies.
Maintaining a high level of technological knowledge and expertise, boosting innovation wherever we can, I consider to be of paramount importance here. We must continue to live up to expectations in this respect.
In order to use a substantial part of our gas revenues for investment, we have established the Economic Structure Fund, FES. Underground riches thus translate into benefits for long-term development above ground, so to speak.
We use FES-money to finance physical networks as well as knowledge infrastructure. Investments in both areas are vital to the success of the Dutch gas roundabout. The importance of 'soft infrastructure', made up of knowledge institutes, research facilities and all kinds of specialist fora, to my mind can hardly be overestimated.
As was the case fifty years ago, the gas market is now entering a new era. It will prove another test of our pioneering skills, our ability to innovate. The lesson learnt from the past fifty years is that we are up to any challenge, provided that public and private sector work together in the interest of establishing a clean, clever and highly competitive energy system.

Thank you.

woensdag 17 juni 2009