Holland as gas hub – why and how

Toespraak | 21-03-2011

Your Excellency/Your Excellencies, ladies and gentlemen,

Today, Holland is only one LNG tanker away from Qatar.

Gas is as old as the earth itself, yet it never ceases to amaze us. Over the last decades, gas has turned from a local commodity into a global commodity. It is increasingly connecting all of our countries into a world wide gas web. A web in which Holland is becoming the central hub for Northwest Europe.

Ladies and gentlemen, these are words that should have been spoken to you by the vice prime minister of the Netherlands Maxime Verhagen, who is also the minister responsible for energy. But as you know, the European ministers of energy were all called to Brussels today for a special Council meeting about the dramatic events in Japan. On behalf of the Dutch government, I want to present all my sympathy and support to the Japanese government and the Japanese people.

And I will now read to you the address that Minister Verhagen wanted to deliver personally.

Ladies and gentlemen,

It is my pleasure to welcome you all to Amsterdam. And it’s a rare privilege to have such a large high-level audience from all over the world and from all segments of the gas world. I would like to thank the organisers, and in particular our host sponsor Shell, for making it possible.

I realise that promoting gas to people from the gas world is like preaching to the converted. Yet that is exactly what I plan to do, before telling you what you can expect of me, and what I expect of you.

Market trends favour gas

Ladies and gentlemen,

Will the 21st century be ‘the Golden Age of Gas’? That, in any event, is what the International Energy Agency believes. A leading institute that will soon be led by the previous Dutch minister of Economic Affairs, Maria van der Hoeven.

Notwithstanding the uncertainties about our energy future, there is a growing consensus among policymakers, business leaders and energy experts that the outlook for natural gas is bright.

And with good reason.

Both gas demand and supply have increased dramatically in recent years. And they are expected to increase by over 40 per cent by 2035 (IEA, World Energy Outlook 2010). Of course, you all know why. In its most recent five-year plan, China aims at doubling its domestic consumption of natural gas by 2015.

Meanwhile, European gas consumption is also expected to increase substantially in the next two decades (Eurogas expects European demand to rise by 43% between 2005 and 2030. Source: Long-term Outlook to 2030, 16 November 2007.). as more and more power plants rely on gas. In the Netherlands, for instance, no less than 60 per cent of all electricity is generated by gas-fired power plants. Gas also adds flexibility to coal-fired and nuclear power plants and serves as a back-up for wind and solar energy production. Gas prices could have soared in line with demand. But they haven’t. Companies are investing heavily to meet present and future demand.

I accompanied Queen Beatrix of the Netherlands on a State visit to Qatar, the world’s number one producer of liquefied natural gas. We were impressed by the scale of LNG and gas-to-liquid operations at Shell Pearl. The company has invested some 20 billion euros in the past seven years in what is possibly the largest industrial complex in the world.

As a result of such heavy investments, global gas supplies have increased dramatically. LNG production is growing fast. Europe’s LNG imports went up 22 per cent last year. The world’s LNG capacity is expected to triple between 2012 and 2015. And LNG should account for one-third of supply growth by 2035 (IEA, World Energy Outlook 2010).

Unconventional gas might be another game changer. The United States is leading the way: it has seen a mind-boggling twenty-fold increase in unconventional gas output in the past decade (IEA Chief Economist Fatih Birol in Power-Gen, 10 November 2010). Many other countries are following its lead.

We recently granted a licence to the British company Cuadrilla Resources for test drilling of shale gas near the Dutch town of Boxtel.

In short, while demand is increasing, gas prices are becoming more competitive worldwide. The trend is likely to be further enhanced by environmental regulations. Such as stricter standards for coal-fired power plants. Or demands to reduce CO2 pollution through an improved emission trading system.

Holland is a gas country

These bright prospects for gas, ladies and gentlemen, are good news for the Netherlands – and for Europe. We have been a gas-producing country for over half a century, following the discovery of gas near the northern village of Slochteren. At that time, Slochteren was the largest field in the world; nowadays, it still is the 10th largest, but it will be depleted within a generation. Yet paradoxically, our future as a gas country is only getting brighter.

In the ten years from 2005 to 2015, no less than 20 billion euros will have been invested in the Netherlands in the exploration and production of gas, in transport infrastructure and in gas-fired power plants. In business, in politics and among the Dutch public, support for gas is widespread. We believe that gas is here to stay. And we want it to stay. For three clear reasons:

• it’s a crucial sector of our economy;
• it can help us meet our climate goals;
• it can help guarantee energy supplies for the future.

Let me briefly elaborate.

First, gas equals income and jobs. Holland is the largest gas producer in the EU and 8th largest worldwide. The industry provides jobs to some 66 thousand people, represents 3 per cent of our GDP and exports and some 8 per cent of central government revenues (Figures from Brattle Group report, December 2010). Gas is in every household, as almost all households are connected to the gas grid. The share of gas in the Dutch energy mix is 40 per cent - compared with an average of 25 per cent for the EU as a whole.

Second, gas is the cleanest of all fossil fuels. We are aiming for a low-carbon society by 2050, as agreed in the EU’s Roadmap 2050. Sustainable energy alone will not do the trick; there is enough evidence that green energy cannot fully replace fossil fuels in the foreseeable future. But switching from more polluting fossils to gas will help us reach our short-term and long-term climate goals. Gas can help us make the transition to an almost carbon-free society in a cost-effective way.

Third, gas will help us ensure security of supply. Political uncertainty [and natural disasters] in different parts of the world remind us of the wisdom of not relying on supplies from a single source. We need to diversify our sources of supply, our supply routes and the types of fuel we use.

Gas will be available in the Netherlands and Northwest Europe for decades to come. Not only from our own fields but also from numerous foreign sources. Our regional gas market is one of the most liquid and well-functioning in the world. Clearly, gas is and should remain a central component of our energy mix.

Enhancing the role of gas: what the Dutch government will do

So, what will I do to enhance the role of gas in the future energy mix? First of all, ladies and gentlemen, the Dutch government will continue to seek cooperation within Europe and beyond. To increase the share of gas in the Northwest European energy mix. To develop the European energy market. To meet climate goals. And to improve interconnections.

I can assure you the Dutch government is highly motivated in this area: we aim to firmly anchor gas in our present and future energy system. We believe countries should focus on what they do best, and work hard to do it even better. This is why I decided to go the extra mile for energy as one of the top sectors of the Dutch economy.

Former Shell CEO Jeroen van der Veer now leads a lean and mean team that will shortly be advising me on how to strengthen the energy sector. I see three priorities we will certainly agree on.

First, develop our gas hub strategy and at the same time comply with emission targets. Second, further improve the business climate, cut red tape and stimulate investment in new technologies. Third, foster cooperation and innovation. Our commitment to strengthening Holland’s position as the gas hub of Northwest Europe means that we will continue to develop a sound and stable legal and regulatory environment. It also means we will promote investment in LNG facilities and gas storage.

Gas storage allows us to meet increased demand in wintertime and if supplies are disrupted. It also stimulates trade and the further development of the European gas market. That is why I am convinced that we must push forward with the Bergermeer gas storage project near the city of Alkmaar. The government will take a decision on the 8th of April.

Fostering game-changing innovation is an essential part of our policy for the top sectors. New technologies will allow us to explore and exploit new fields and new varieties of gas. To create new applications for gas. And more economic activity. This is why I will be supporting a range of current initiatives. Like a new energy institute in northern Holland to strengthen our knowledge infrastructure. Like new and stronger energy clusters such as Energy Valley. Like exploring the opportunities for unconventional gas and LNG, such as the use of LNG by ships in the North Sea and on domestic waterways.

Enhancing the role of gas: what the industry should do

Ladies and gentlemen,

Challenges have helped us become what we are today. Our struggle with water has made us experts in water management. Surmounting the limitations of our territory has made us a leading country for agriculture and food. In terms of size, we are the world’s 134th largest country. Yet we are the second largest exporter of agrifood.

The secret of our success? It’s not just innovation. Above all, it’s cooperation. Between business, research and government.

This is why fostering cooperation among these three players, and with stakeholders outside the industry, is an essential part of my policy for the energy sector. This brings me to my final point: what do I expect from the energy industry? We can only be successful if you in the industry commit to doing your part, too. According to the Brattle Group report presented late last year, the gas hub strategy requires market investment of 7.7 billion euros. This should pay off handsomely, for this investment is expected to generate over 21 billion euros in additional economic activity!

You are in the driving seat. You are making the investment decisions. You can effectively increase the share of gas in the Dutch and European energy mix. You can make gas greener and cleaner. You can help us make the case for gas within the EU. You can let us know what governments should do to ease barriers, lift obstacles and pave the way for gas.

I have every reason to believe that you will do your part. The industry is fully engaged in the Gas Hub Consultative Platform that we launched a year ago. It has already drawn up valuable recommendations. Now is the time to implement them! I also welcome the recent report by the European Gas Advocacy Forum, which includes Shell and eight other companies. They rightly stress that gas can help us make the transition to a low-carbon society in the quickest, cheapest and most pragmatic way possible. I am eager to see follow-up on that report.

Conclusion - Vision 2050 - gas as a destination fuel

Ladies and gentlemen,

I believe the next few days will provide you with new insights into the crucial issues facing the global gas industry. Above all, I hope they will give you new incentives to team up with partners and research institutions and innovate to meet the challenges of the future.

I believe that 50 years from now we will still need fossil fuels; gas is our smartest and cleanest bet. It may be evanescent, but gas is here to stay. Both as a transition fuel and a destination fuel. Because gas is fairly clean, readily available and highly flexible. The Dutch government is firmly committed to securing Holland’s position as the gas hub of Northwest Europe. That includes developing possibilities for gas storage. Creating an excellent business climate. And promoting enhanced cooperation at European level.

But you in the industry call the shots. As long as you continue to invest and innovate, the future of gas will be even brighter than it is today. And its benefits to our societies even greater.

Thank you.