Dutch Government to Cut Groningen Gas-Field Output

By Maarten VanTartwijk in Amsterdam and Sarah Kent in London 

AMSTERDAM--The Dutch government said Tuesday it will cut production further at a giant gas field blamed for causing earthquakes, crimping output for energy titans Royal Dutch Shell PLC and Exxon Mobil Corp.

Production at the Groningen gas field will be slashed to 13.5 billion cubic meters in the second half of 2015, the government said, resulting in total output of 30 billion cubic meters this year, substantially lower than the previous target of 39.4 billion cubic meters.

The move is the latest in a series of production cutbacks by the Dutch government in recent years after a study by The Royal Netherlands Meteorological Institute linked gas extraction to a rise in earthquakes in the northern province of Groningen, where the field is located. The tremors have damaged many homes in the area.

"The safety of the people of Groningen is the most important," said Henk Kamp, the Dutch Minister of Economic Affairs. "Gas production from Groningen will be reduced as far as feasible."

Discovered in 1959, the Groningen field is one of the world's biggest natural gas reserves and is a key source for Europe, accounting for roughly 10% of the European Union's total gas supply last year.

The field is operated by a joint venture of Exxon and Shell, called the Nederlandse Aardolie Maatschappij, or NAM. The operator is facing hundreds of compensation claims from people who allege the earthquakes have damaged their homes.

A report from the Dutch Safety Board, a government-financed body, concluded in February that the Dutch government, as well as the field's operator, for decades ignored the risk of earthquakes stemming from gas extraction.

Shell and Exxon didn't immediately respond to requests for comment on Tuesday. NAM has acknowledged that its operations have been responsible for earthquakes.

"We will keep investing in the protective strengthening program and our studies for getting a better view of the hazards and risks of earthquakes," NAM spokesman Sander van Rootselaar said on Tuesday.

"We are now looking at the possibilities on how we are going to implement these new caps on production," he said.

In the more than 50 years that the field has been pumping, experts say, the porous underground gas-bearing reservoir has begun to deflate, building tension along a fault zone that is released from time to time in sudden jolts, and which are felt at the surface as earthquakes.

The first such quake occurred in 1991. As the gas field becomes more depleted, the tremors are growing both in size and frequency, experts have said.

In 2013, NAM registered a record number of 119 quakes, of which two measured between magnitude 3 to 3.5. A year later, the number of quakes dropped to 80, which experts attributed to production cutbacks.

The Dutch government has been reluctant to lower output at the Groningen field, which generates billions of euros in revenue for the state.

The production cutbacks could mean the Netherlands becomes more reliant on gas imports, for example from Norway and Russia, Mr. Kamp has said previously.

Write to Maarten VanTartwijk at [e-mail]

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