Towns in the northern province of Groningen sit atop the continent's biggest gas field, where the Dutch government says exploration by Royal Dutch Shell Plc and Exxon Mobil Corp. has triggered 196 earthquakes since 2013, damaging buildings and making home sales difficult. Lawmakers, seeking support in provincial elections March 18, have responded to residents' complaints with a proposed cut in gas production, the second since December, in the hope that less output means fewer tremors.
The reductions would put the European Union in a predicament. Countries may have to turn to Russia to replace Dutch gas at a time when they're trying to isolate President Vladimir Putin for his involvement in Ukraine. For the Netherlands, the bloc's biggest gas producer, less gas could reduce national income by almost 2 billion euros ($2.1 billion), according to the Ministry of Economic Affairs.
"The coalition parties are overall under pressure," said Frank van Doorn, head of gas trading at Vattenfall Energy Trading Netherlands NV, the country's largest retail supplier. "They have to do something to make voters happy and at the same time balance the impact on the Dutch government budget."
The country counts on its energy industry for about 11 percent of gross domestic product. Export customers include Germany, Belgium and the U.K. The Netherlands produced 70 billion cubic meters of gas on- and offshore last year, according to data from network operator Gasunie Transport Services. That's more than Italy's total 2014 demand. The Groningen field accounted for 61 percent of that and generated an estimated 10.7 billion euros in revenue, according to data from Nederlandse Aardolie Maatschappij, or NAM, the joint Shell-Exxon venture that owns 60 percent of the field, and the Ministry of Economic Affairs.
Dutch lawmakers have progressively cut the 2015 output target for Groningen gas. In December, they announced a 7.3 percent reduction. An additional cut, proposed Feb. 9, sent prices up 11 percent that week -- more than in the period following Russia's Crimea incursion. Now lawmakers are proposing an 11 percent cutback for the full year.
Earthquakes have been reported in places such as the U.S. state of Oklahoma, where exploration companies drill horizontally and blast chemicals, sand and water into rock to extract fuel, a process known as fracking. Only conventional, vertical wells have been drilled in Groningen, making the tremors there unique, said Heleen Haverkort, a spokeswoman at the Ministry of Economic Affairs.
In the Groningen village of 't Zandt, artist Wout van Mullem, 57, said he decided to make his house earthquake-proof after almost five years of unsuccessfully trying to sell it. The structure is one of many in the area that suffered from cracking walls or shifting foundations.
"You have to face the reality that Dutch society needs the gas from Groningen," Van Mullem said. "We have to find a way to extract gas from the field in an acceptable manner for everybody."
Down the road, Jan Boer, 75, is waiting for the community center in the village of Leermens to be reinforced. Angled wooden beams support the external walls and the interior of two rooms. And near NAM's office in Loppersum, where 3,000 of the area's 10,000 inhabitants live, paintings in the Petrus and Paulus Church dating from the 1500s have needed restoration.
Tremors in the province started in the 1980s and intensified in the 2000s, according to NAM, the Shell-Exxon venture. The biggest quake, with its epicenter in Loppersum, measured 3.6 on the Richter scale in 2012, resulting in about 12,000 damage claims, according to the Paris-based International Energy Agency.
While the scale might seem small, tremors are felt more because their epicenter is at the gas field, only 3,000 meters (10,000 feet) deep, said Harry van der Meijden, inspector general at the State Supervision of Mines.
While NAM said it has plans to strengthen 3,000 buildings in Groningen province this year and has set aside 1.2 billion euros for projects including repairs and the strengthening of homes, Loppersum Mayor Albert Rodenboog said initial calculations show that 30,000 buildings will need reinforcement, costing as much as 6 billion euros.
The government ignored the security of citizens in Groningen for years, according to a February report from the Dutch Safety Board. Trust was already low, Rodenboog said, because in 2013, after the State Supervision of Mines said gas production needed to be cut to keep residents safe, output in Groningen province rose to the highest in 32 years.
Cutting production will likely reduce the frequency and intensity of the earthquakes, according to Van der Meijden. NAM takes a different position. Earthquakes aren't only caused by the volume of gas, said Sander van Rootselaar, a NAM spokesman. When production in Groningen climbed to a record in the 1970s, there were no tremors, suggesting other factors may also have an influence, he said. While lower gas output can help reduce the number of tremors, it doesn't mean lower intensity, he said.
The Netherlands will decide July 1 whether to reduce 2015 extraction to a maximum 35 billion cubic meters with 2 billion of that to be produced only if needed, Henk Kamp, the minister of economic affairs, said Feb. 12.
Gas production can drop to between 27 billion and 33 billion cubic meters, depending on weather and other factors, and still meet domestic demand and honor export contracts, said Anton Buijs, a spokesman for GasTerra BV, the only marketer of Groningen gas.
As for consumption, the Netherlands depends on Russia for about 4 percent of its gas, but that could increase depending on how much the government decides to cut back, Haverkort said.
While European gas prices jumped on the Dutch plans, they have since erased gains as Russia started boosting supplies and more cargoes of the liquefied fuel arrived as Asian prices collapsed to near European levels.
The U.K., Netherlands and Belgium received 24 LNG cargoes in the first two months of the year, more than double a year earlier, according to port authority and ship-tracking data compiled by Bloomberg.
"The fact that Asian LNG prices are falling is certainly helping," said Van Doorn of Vattenfall. "There's also a good chance that Russia and Norway can put more gas into the European market without driving down prices. There's no need to panic."
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