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Interview

Han Fennema – CEO, Gasunie – Netherlands

15.06.2015 / Energyboardroom

In light of declining indigenous production, the CEO of Gasunie Han Fennema portrays the company’s vital role in facilitating the country’s energy transition, and the importance of having an expansive and flexible pipeline infrastructure spanning multiple regions in Europe. He also highlights the industry’s growing interest in small-scale LNG, within the context of environmental sustainability, and other green initiatives Gasunie is pursuing in that regard. 

The Netherlands has positioned itself as Europe’s ‘gas roundabout’ and the country wants to maintain its current position as a gas trader by shifting from a gas producer into a merchant of Dutch and imported gas. What role is Gasunie, which operates a 15,500km pipeline network in the Netherlands and Germany and has assets of EUR 9.16 billion, playing in supporting continental Europe’s largest natural gas hub?

We are a gas transportation and infrastructure company responsible for developing infrastructure and bringing gas from point A to point B. Historically, there’s been a very large amount of gas production here in the Netherlands, and a large part of our widespread, internationally-connected network is a heritage of that.

But the character of the Netherlands as a producing country is starting to shift, through an increasing level of production caps on the Groningen field. About 75 percent of Groningen field has been depleted, with approximately 700 bcm remaining. Initial foresight of dwindling supply security in the Netherlands, was in part the reason why Gasunie, in line with the government’s objectives, created the gas roundabout. With this expansive and interconnected network of gas infrastructure, gas can now flow from multiple sources in and out of the Netherlands, whether it’s from the country’s own gas fields or other countries such as Norway, Russia, Denmark, and, in the form of LNG, from a variety of other supply areas all over the world.

Two important features have contributed to positioning the Netherlands as the energy hub of Europe. The first revolves around the investments in new infrastructure, positioning this country at the heart of the international gas flows, and providing it with storage and flexibility capacity and excellent cross-border interconnections. Secondly, Gasunie developed a range of infrastructure services within our entry-exit system making the hub attractive for trade. One of the services is ’‘quality conversion’: high calorific gas that shippers bring into the country can be seamlessly converted to low calorific gas, which the majority of domestic appliances use, through our nitrogen facilities. We also developed the Title Transfer Facility (TTF)—a virtual marketplace where we offer our customers the opportunity to trade gas that is already in our system. Partner ICE Endex added important services to the marketplace. With these factors, in conjunction with our storage facility EnergyStock, Gasunie prides itself on providing flexible infrastructure that effectively accommodates demand fluctuations in the market.

Can you please tell us more about Gasunie’s evolution since its creation in 1963?

With the initial discovery of the Groningen gas field, Gasunie, existing for over 50 years now, has been very successful in developing the gas market in the Netherlands and Northwest Europe. Our second major milestone centers on the liberalizing of the market through the separation of the trade branch (now called GasTerra) and Gasunie, and in turn, establishing the Netherlands as Europe’s gas hub. The third phase involves Gasunie’s role in facilitating the energy transition. Current government objectives are targeting a 80 – 95 percent decrease in CO2 emissions by 2050—evidently setting off an industry-wide focus on diminishing carbon footprints and promoting environmentally sustainable practices. To this end, Gasunie’s challenge revolves around providing the proper infrastructure and services to seamlessly accommodate the increasing share of sustainable energy and supporting and co-developing green initiatives.

Given the cap on production at the Groningen field, what is Gasunie doing to remain competitive in light of the shrinking amount of gas produced here in the Netherlands readily available to providers?

The gas roundabout provides the Netherlands with adequate opportunities to accommodate a shift from indigenous production to imports. In the case of falling indigenous production levels, gas suppliers will purchase gas from other regions such as Norway, Russia, or LNG from the Atlantic, Middle East or Pacific. We will continue providing gas infrastructure services, regardless of the origin. But there is certainly still work to be done to facilitate this shift. Diminishing production volumes in the Groningen fields will increase the need for more quality conversion capacity to transform high caloric gas in low calorific Groningen gas quality that is used in domestic appliances. With the subsequent increase in high calorific gas imported from external sources, Gasunie has to make significant investments in constructing more nitrogen facilities to accommodate the increase in quality conversions.

How is Gasunie contributing to the rebuilding of trust here in the Netherlands surrounding natural gas, in light of the earthquakes?

Gasunie is not involved in the production or sale of gas. However, we see the seriousness of this issue and see the need for parties involved to come up with the right compensation and solutions. From our perspective as a gas infrastructure company, our efforts can support the government’s initiatives in further reducing Groningen production levels. For instance, our nitrogen facilities allow for the import of more high calorific gas from external sources to sufficiently accommodate local consumption. But the earthquakes have evidently burdened the image of the product we work with. We support discussions with the national and local governments to develop methods of rebuilding public trust in natural gas among community stakeholders.

The company has decided to expand your LNG facilities at Rotterdam’s Gate terminal, with the launching of the construction of the break bulk facility in March 2015. What do you see as the role of LNG in the Netherlands’s continued positioning as a gas hub for Europe in terms of security of supply and new sustainable fuel options?

Compared to heavy fuel oil, LNG is a cleaner transportation fuel alterative and serves as an important energy source for future market sustainability. Especially with increasingly stringent emission regulations in the North and Baltic seas, the widespread use of LNG as a transportation fuel is growing rapidly. Whether it is in barges, coasters, ferries, heavy duty trucks, and other industrial vehicles, the use of LNG can reduce carbon dioxide (CO2) emissions by up to 20 percent and nitrogen oxide (NOx) emissions by up to 85 percent—while simultaneously reducing sulphur and particle emissions to almost zero. Gasunie’s role in this shift towards cleaner and more sustainable fuel alternatives focuses on providing the infrastructure to effectively support this transition. Together with Royal Vopak, our partner at the Gate terminal, we’ve initiated the construction of a new LNG break bulk facility at the Maasvlakte site in Rotterdam. With Shell as our launching customer, the break bulk facility aims to increase the distribution and use of smaller scale LNG services. This is the first, in what we hope, of many break bulk facilities for maritime vessels and industrial vehicles that will be developed along the shores of the North and Baltic seas. In the context of the energy industry’s overall supply security, small-scale LNG shipments effectively create opportunities for those not connected to gas grids to leverage LNG, as a cleaner and more cost-efficient transportation fuel alternative to oil.

We strongly believe in this ‘small scale LNG’ development. We are cooperating with partners to make this new fuel chain a success, with Gate terminal, as a European LNG hub, at the basis. And let’s not forget, in a strategic sense, Gate terminal, with its huge import capacity of 12 – 16 bcm, is one of the pillars of Europe’s energy supply diversification in the first place. It makes the Dutch gas roundabout a true omnidirectional phenomenon.

Such efficiencies, coupled with declining indigenous natural gas production, have created a sort of energy transition—leaving the Netherlands with increasing dependence on LNG exporting countries such as Russia.

Can you please tell us more about the HarvestaGG project in Groningen. How will this project advance both the green and LNG agendas?

HarvestGG is based on the fermentation of grass, an intermediate crop for farmers, and also the basis for production of green gas, and quite possibly bio LNG. It’s an innovative technology that also creates fertilizer as a side product. We’re also investing in the development of new technologies that will enable green gas supply on a larger scale — gasification. We believe gasification has a lot of potential. In the long term we foresee viable scenarios in which gasification is performed at the source of the biomass with trees originating in Sweden that are imported from Russia. The byproduct, green gas, is then shipped to the Netherlands or other parts of Europe using Gasunie’s existing infrastructure, in this case, the gas roundabout.

In 2014, Gasunie reported impressive results with regards to safety accidents, listing the safety performance in the field of pipeline damage below the signal value of six. An improvement program was drawn up. What changes in company safety has the organization seen with regards to safety?

Any time excavation activities are announced in the proximity of our infrastructure, we personally check whether our pipelines are adequately distanced and protected from the excavation. Additionally, we regularly perform a thorough review of all potential incidents from a quality assurance perspective to further fortify our safety procedures. Despite comprehensive safety guidelines and precision equipment, however, human error is typically at the helm of most accidents. With that said, we continue to conduct extensive training and education in the areas of last minute risk assessments and emergency protocols to reinforce our safety levels. Woe had only one outage last year that lasted for half an hour.

In March of last year, it was stated that Gasunie sees Belgian Fluxys and German OGE as potential shareholders if Parliament allows cross-shareholdings for network operators. How has the situation developed and what would be the advantages for Gasunie of creating a large European gas network?

In order to strengthen the Dutch roundabout and optimize gas flows, I mentioned that it might make sense to cooperate with neighbouring transmission system operators (TSO), such as Belgian Fluxys, Gasunie Deutschland, and German OGE. There is a debate whether our share should stay with the government or allow for partial privatization. Currently, the Dutch government wants to stay a 100 percent shareholder, or perhaps a minority shareholder in another TSO. If you work together with another TSO, then I had stressed the importance of working together with those parties located in proximity of the Netherlands.

With an impressive track record in the energy sector starting in the mid-1980s at ExxonMobil, what has been your biggest motivation to continue advancing and working within the energy industry?

During childhood, I worked as a meter reader for the regional gas distributor in my area. Although not the most glamorous, this job gave birth to my love for the energy sector. I then worked with Exxon Mobil in the gas sector, which was a 25 percent shareholder in Gasunie at that time. I remember telling myself that I would love working for a proud company like Gasunie that is at the center of the energy sector in the Netherlands, and perhaps even Northwest Europe at the time. My motivation stems from my initial passion for Gasunie, but also from working in a sector that is on the edge of public interest. I especially enjoy leading a company that is at the forefront of facilitating the energy transition in a way that both society and economy benefits from that transition.

Where do you expect to see Gasunie in five years time?

Within the next few years, I would like establish Gasunie as the leading provider of gas infrastructure services for our customers in the Netherlands and Europe. Additionally, we hope to position our company as the frontrunner in the country’s energy transition by further integrating gas with the capabilities of alternative energies such as electricity and strengthening partnerships with neighbouring grid companies to optimize flows and flexibility.

 

Click here to read more articles and interviews from the Netherlands, and to download the latest free oil and gas report on the country. 

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