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Nogepa

– Jo Peters, Secretary – Netherlands

06.10.2014 / Energyboardroom

Jo Peters of NOGEPA describes the current context of operations for the Dutch exploration and production industry. He comments on current levels of regulation, policy and the future energy context for the Netherlands. He acknowledges the increasing efforts to maintain production which are being moved forward by both governmental and private sector players and reflects on potential sources of gas which can lengthen the industry’s ability to satisfy domestic demand in the Netherlands.

What have been the most significant events impacting on the E&P sector, in terms of discoveries, innovations or legal regulation for example over the last few years?

The Macondo, or Deepwater Horizon oil spill in the Gulf of Mexico has had significant ramifications for the industry here in the Netherlands, as well as operations world-wide. There have been many developments aimed at improving safety in the wake of this disaster. Of course, the industry here in the North Sea must be vigilant to ensure that such an accident does not happen here. Fortunately, we are aided by circumstances that make such an incident less likely. The water depths are far shallower here in the North Sea and the well pressures in the Gulf of Mexico are far higher.

By a clear margin, this has been the most critical event that the E&P sector has had to react to in the recent past. In Europe, a trans-national response has been formed, with the emergence of the European Safety Directive to which all EU countries will have to adhere.

According to EBN’s annual report on the Dutch oil and gas industry, the investment level in the Netherlands needs to rise to 1.4 billion EUR annually to maintain current production levels. What is the plan for 2014 in terms of investment?

These figures, released by EBN who have a substantial involvement with all oil and gas developments in the Netherlands are a very useful gauge on how much investment is needed. The EBN is concerned whether gas production levels could be maintained for the next 10 or 20 years. To achieve such sustained production, more investment is needed now.

The Netherlands will only secure this investment if costs fall to encourage further production. Should tax rates on production fall, more would be produced, which would be good for business and society in the Netherlands– ultimately beneficial for the government too. Currently, politics in the Netherlands is somewhat bi-polar- the coalition that makes up the government consists of parties from alternate directions of political thought. For this reason, forming a coherent policy suite is more difficult.

However, in the current geopolitical context, Europe is waking up to the need to invest in gas production now in order to achieve a secure energy supply tomorrow. This helps, but at the moment a solid number of political perspectives are still opposed to increased development of gas resources.

In 2010, the marginal fields tax allowance was introduced to encourage investment in more marginal offshore fields. How successful has this been?

This incentive has worked well; now NOGEPA hopes to encourage the government to reinforce this allowance which would certainly deliver more developments. The horizon for encouraging investment needs to stretch for the next five to ten years, and have an international perspective. Many countries hope to stimulate industry attempts to utilize hydrocarbon resources- meaning companies will direct effort to the most hospitable and profitable locations.

The Dutch gas industry is synonymous with the Groningen resource- but with earthquakes which have been associated with continuing production, gas output from the Groningen field has been reduced. How has this changed the E&P landscape in the Netherlands, and is this the beginning of the end for the Groningen resource?

It is most certainly not the beginning of the end for the Groningen resource- there are still many years of gas to come from this asset.

However, the earthquakes have certainly affected public perceptions of the E&P industry, with more and more critical voices arising. This is understandable, these residents are suffering from minor- but nonetheless serious- earthquakes due to the production which has been of benefit to the whole population. These residents feel let down by the government. More efforts must be made to ensure all stakeholders are dealt with fairly.

In a country like the Netherlands, which has a very high population density, do you think there is any future for shale gas?

With regard to shale gas developments, public perception is poor, in part because of the earthquakes at Groningen and secondly because of the anti-shale gas lobby. However I would like to discuss shale gas in its European context. There are excellent prospects for shale gas across the continent- and a notable degree of opposition. However, in light of the situation with Russia and in the Ukraine, many are waking up to the fact we need a secure supply of gas in the EU. With regard to the Netherlands, the official NOGEPA position is that more must be known about the potential of the resource, and what conditions would have to be placed on any utilization of this resource, if necessary and if the potential reserves merit development.

A number of test-wells would need to be sunk before the true scale of the resource can be ascertained. There have been a wide range of estimates of the resource made by specialists- but this must be proven by limited exploration before this resource is written off, or exploited on a reasonable scale- extraction must happen in a safe fashion.

The industry does not want to undertake unsafe, or harmful operations. Risk must be assessed in an appropriate fashion- hyperbole and hysteria have no place in deciding a country’s energy policy. Many share a conviction that this resource underneath the Netherlands estimated between 200-500 btu of gas p/year could be accessed safely and responsibly.

Last year, the EBN presented the results of seismic studies in the northern part of the Dutch North Sea. Historically underexplored, what are current levels of interest in this area?

This is one of the reasons a better incentive for exploration should be pushed forward. If one looks at a resource map of the North Sea, there are many gas fields in close proximity to this area- it warrants further investigation. With regard to energy policy, there are not ‘two options’ that of seeking new gas fields, or pursuing renewable energies for example. Opening up new gas resources can replace coal- the most harmful of fuel sources- and assist the move towards a more sustainable, environmentally benign energy system. Energy demand is increasing, and it will be increasingly difficult – on a worldwide scale- to deliver sufficient supply. We need a clean, reliable source of power, and gas can go some of the way to providing that.

What are the key challenges that the industry faces over the next few decades?

Over the next 20 years, investment must be maintained. Production must continue, in a safe manner despite the ongoing aging of assets. That in particular, is a reason we must invest now to secure supplies tomorrow- or our infrastructure and equipment will simply not be fully capable of delivering our supplies. Planning for the future is the most important task for the industry and government now.

 

To read more articles and interviews from the Netherlands, and to download the latest free report on the country, click here.

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