There are limits, it appears, to European citizens’ appetite to enable the continent to reduce its dependence on Russian gas, even after the Putin regime’s aggression in Ukraine. For example, Menno Snel, chairman of Dutch oil and gas lobby group Nogepa—and also a former Dutch secretary of state for finance and executive director at the IMF—rules out the possibility that the Dutch public would accept increasing production from the soon-to-be decommissioned Groningen field because of political sensitivities around earthquake damage linked to onshore gas exploration.
But he does see the potential for incentivising more offshore gas exploration on the Dutch Continental Shelf, including innovations such as the government taking on more early-stage risks by carrying larger stakes in exploration projects.
How would a Russian gas supply interruption impact the Netherlands?
Snel: It would affect us heavily because we are a net gas importer. It is quite a simple equation: If Russian gas supplies stop, we would need to source our energy elsewhere and that is not so easy.
Does Norway have extra gas for us? No, they have long-term contracts with other parties. Can we find extra gas from Qatar? Maybe, but not the amount we would need.
Or should we go all in on fracked gas from the US? To me the most logical option is that we need to look at what we can do ourselves, what Europe can do for itself. This war is affecting us directly in our wallets because we will have to pay more for our gas security.
Will the Netherlands increase production from Groningen in a gas supply crisis situation?
Snel: No, that is highly unlikely. Everybody is aware of how politically difficult any extra production from Groningen is. Some people may claim it is rather safe to operate at low production levels, but for the people living in the northern part of the Netherlands I see it as an awful option. Never say never, but in my own experience we will do anything before we look at the option to produce more gas from the Groningen field.
What expectations do you have from the new government, which has promised to support the Dutch North Sea gas sector?
Snel: Looking at events in Ukraine it is clear to me that, as long as Europe still needs natural gas, the North Sea is not a bad place to look at. We still have ‘a sea of opportunities’ for offshore gas production in the Netherlands that we need to make use of, whether we are looking to reduce imports from Russia or imports of fracked gas from the US.
What is new for this coalition government is that it is realistic about the need to become even more active on the small fields in the North Sea. I was rather pleased with that because it is smart, ambitious and the right thing to do from whichever angle you look at it. If you ask me what I expect: not only words but also deeds.
What actions would you like to see?
Snel: There is not one solution. If you look at the energy production in the Dutch part of the North Sea, it is not thriving as it used to, but I am convinced we will have to engage in Dutch offshore gas exploration and production for another 10-20 years at least. To ensure that real investments come through we need longer-term predictability than the four-year period of a new government.
We have issues with permitting processes that take a long time in comparison with other countries. We are looking into that right now.
We also feel that there remains a lot of exploration risk on the operator’s side, so we would like to see the government taking a more steering role in the exploration phase. You could say, for example, that during the exploration phase the stake held by [the Dutch state’s oil and gas holding company] EBN is increased.
This is exactly why we have been promoting one important issue: the North Sea Transition Deal, a little bit inspired by a similar deal signed last year in the UK. It is an agreement where the sector is clearly stating what it will do in terms of production but also on its role in the energy transition.
The government seems to be ready to talk to us about this kind of deal. The Ministry of Economic Affairs and Climate Policy is putting a team together that can work on this. With a joint public-private deal we think we can attract investors to the North Sea to invest in gas exploration.
Are you requesting financial support from the government as part of the deal?
Snel: No, certainly not. It is always easy to ask for financial support, but to be honest, at a time when gas prices are as high as today, asking for financial support from taxpayers is not the way to go. What is really important is that we have a clear government commitment to a predictable investment climate and security for investments.
We also need to look at some of the instruments the government could put in place. If you want to have a thriving energy sector in the North Sea, we need a lot of active new players in our market to carry out the innovation we need.
One of the options is to make it easier to transfer assets from company A to company B to make the transition period economically more flexible. When you compare us to other North Sea oil and gas exploration countries you can see that they did a better job, they are making it easier for companies to step in and out.
Will Dutch oil and gas companies also commit to a 50pc greenhouse gas (GHG) emissions reduction by 2030 like UK companies?
Snel: Yes, absolutely, and hopefully even more. We are working on something we are calling the ‘action agenda’, which can serve as our pledge to Dutch society It includes the role of the sector in building a greener future through the efficient and less costly energy transition. We are ready to couple these pledges to a North Sea Transition Deal: how to reduce our GHG emissions (both methane and CO₂ emissions), how to move to full electrification of our production, and how to play a role in hydrogen production and transportation.
If you start producing less oil and gas it is rather easy to reach a 50pc GHG emissions reduction. I do not want to have a promise that is too easy for us. I hope this pledge will be ambitious enough for others to say: “This is really taking it to the next level.”
We are the second North Sea country making this kind of transition deal now, so we are calling upon other countries to join our pledge. It would be even better if we end up with a joint action agenda not only on emissions reductions but also on transparency.
What is needed to encourage small players to invest in the Dutch North Sea?
Snel: Again, the most important thing is that the government is seen by investors as being predictable and straightforward in what they expect from the sector. Politicians say now that they really believe we need to invest in security of our energy supply, especially in these challenging times. But these same politicians should not then shy away from explaining to the public that—in order to become less dependent on others—we need to welcome the companies that are ready to invest in the gas production here in the Dutch North Sea.
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