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The Netherlands Oil & Gas Outlook

The Netherlands has a long energy history. Today it is adapting to the new low price environment with its customary ingenuity. This article forms part of EnergyBoardrooms’ 2015 Netherlands Report – click here to download the whole report.

The Netherlands is not just the home of Royal Dutch Shell, who back in April announced the second-largest acquisition in industry history with its proposed purchase of BG Group for USD 70 billion. It also boasts an impressive array of globally active service providers and is positioned at the heart of Europe’s downstream market, combining the continent’s biggest port, most concentrated gas infrastructure, and largest storage
and refining capacity.

In 1959, the Netherlands became a considerable gas player with the discovery of Groningen field, which remains one of the world’s ten largest gas fields, and the country stands today as Europe’s second-largest producer and exporter of natural gas with 3.0 trillion cubic feet (Tcf) of production in 2013, according to the EIA. Over 50 years of experience at Groningen has also fostered the development of a sharp skill set for the wider oil and gas industries. “A quarter of the state’s income is directly attributable to gas, or gas related activities,” explains Mart van Bracht, managing director Energy Division TNO, the Netherlands’ organization for applied scientific research. “Many of our other key industries, from logistics to petrochemicals, are also derived from our relationship with gas.” Adding oil to the equation, EY argues that the Dutch oil and gas industry is worth almost USD 17 billion a year and contributes 16,000 jobs to the Dutch economy.

With a population of less than 17 million and a landmass of only 41,526km2, how have the Dutch managed to carve out their substantial oil and gas importance and expertise? Apart from Royal Dutch Shell, very few Dutch energy companies are household names. Even if some of the most innovative companies globally are Dutch, braggarts are frowned upon in this culture that maintains elements of the Calvinist tradition. Rather, companies prefer to invest in people and innovation as a winning com bination and offer results rather than catchphrases, in line with their ultra-direct culture. The oil and gas industry’s strength comes from this Dutch spirit and a backbone of independent and often family-owned companies, as well as the cooperation fostered between these actors.

Number of Operators Based in the Netherlands by Drilling Activity

The Dutch “polder model,” or tradition of cooperation despite differences, is a helpful explanatory tool. A polder is a tract of low land reclaimed from the sea and protected by dikes. “The Dutch had to collaborate or else they would drown,” explains Eric Wesselman, a partner at KPMG Netherlands. “That’s why it’s in the Dutch culture to cooperate: from the center of the country, water is pushed from farm to farm until it reaches the sea. If we didn’t collaborate in this way, the country would be submerged. The Dutch are willing to challenge, but also to share knowledge and resources, and that makes us unique. It also affects how we look at the world: we see ourselves as part of the world we live in rather than separate from it; we are successful because we can easily connect with other individuals, companies, and countries.” This understanding of the value of sharing information and part- nering to bring complementary strengths has trickled down to the oil and gas sector. Geography has further strengthened this common-sense, consensus-based model. VandeGrijp’s managing director Paul Nederlof, argues that “the clo- se physical proximity that Dutch companies find one another in is an important contributing factor to generating this connectivity.”

Like their merchant ancestors, today’s players do not shy away from new markets around the world. As Sander Vergroesen of the IRO, the association of Dutch suppliers in the oil and gas industries, explains, “we are a very small country, but we have been sailing the oceans for hundreds of years. We are sailors , and we are merchants; and when oil and gas appeared on the scene, it was the next step. Over the years we’ve developed as an industry, and since we are used to coming up with solutions all over the world, we are constantly trying to improve every day. This is what we are good at because since the beginning we have been used to developing together.”

This article forms part of EnergyBoardrooms’ 2015 Netherlands Report – click here to download the whole report.

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