If necessary, more gas from Groningen, have the coal-fired power stations produce extra electricity and, if necessary, switch off the largest gas consumers. These were the advice that energy specialists gave to members of the House of Representatives last week in case the supply of Russian gas unexpectedly disappears.
None of those three tips appear in the ‘gas plans’ that Minister Rob Jetten (Climate and Energy, D66) and State Secretary Hans Vijlbrief (Mining, D66) presented last Monday.
In an explanation, Vijlbrief was happy to explain why, for example in the event of a Russian boycott, it is no longer possible to produce gas from Groningen, as some experts have argued. “I advise those experts to come along to Groningen once to see how the people live there,” said the State Secretary. “I understand their reasoning and the importance of security of supply, but more production than we are now planning is not safe according to the regulator.”
The fact that the cabinet is opting for a different course clearly shows that it has to play chess on several boards at the same time. After all, Russian gas supplies are not the only risk. In any case, gas production in Groningen must be ended quickly and then there is another major challenge: the climate. Making relatively heavily polluting coal-fired power stations run faster would be a very bad start for climate minister Jetten’s policy.
Fully committed to liquid gas
The government is now mainly looking to import more liquefied natural gas (LNG). With the supply of more so-called LNG, we can even compensate for the import of Russian gas and the production of the Groningen field. The question is whether that is real.
First some numbers. Dutch households and companies use more than 40 billion cubic meters of gas every year. Groningen, other gas fields in the Netherlands and Russia each account for about 15 percent of this. In addition, a quarter comes from Norway and even a little more is already arriving in the port of Rotterdam in liquid form. Countries in the Middle East, the US and also Russia are the main producers of LNG.
We can double that supply of LNG, 12 billion cubic meters, relatively quickly, was the message from Minister Jetten this week. How? By significantly increasing the capacity of the so-called ‘Gate terminal’ in Rotterdam, where the LNG tankers moor. That would be able to process not 12 but 20 billion cubic meters per year. One of the ways is to increase the ‘broadcast speed’. “That is the speed at which you can convert liquefied natural gas into gas and transport it to our network,” explains gas expert René Peters (TNO). “LNG comes ashore in liquid form and therefore strongly refrigerated. You can easily increase the power required to vaporize it. That is a realistic scenario to achieve that within a year.”
According to a spokesperson for Gasunie, who owns the Gate terminal together with Vopak, “all options are currently being explored” to increase capacity in Rotterdam. This can relate to the production itself, but also, for example, to better logistics.
Floating gas installation
Gasunie and Vopak are also investigating the possibility of processing LNG in Eemshaven in Groningen as well. Rotterdam is now the only landing place in the Netherlands. In his ‘gas letter’ of Monday, Jetten talks about renting a floating LNG terminal that can bring another 4 billion cubic meters of gas ashore. “We will know within a few weeks whether that will work,” said the spokesperson for Gasunie.
Advantage of such a ship – a floating storage and regasification unit (FSRU) – is that the gas is completely processed on the water. The liquefied gas of minus 162 degrees comes from tankers in the FSRU and there it is heated with the help of seawater. Then the gas can enter the Dutch network via a pipeline, without having to build anything on land. Such ships, as for example the exemplar from Antwerp, often end up in a war or disaster on the coast, when the energy network is damaged. Or they ensure the start of production, while a new onshore LNG installation has yet to be completed.
According to Gasunie director Ulco Vermeulen, the floating LNG terminal can be operational by the end of the summer. “We may have to bridge another kilometer to the onshore gas network and do some dredging work, but we can arrange it quickly,” he said during a presentation to the House of Representatives on Thursday.
The Netherlands will not be the only one who wants such a rented FSRU in front of its door if imports from Russia come to a standstill. The costs do not seem to be the biggest problem given the high energy prices: the construction of such a ship costs just under 300 million euros, which is about half the costs of a production location on land. „If we assume an operation of five years in the Eemshaven, then you are talking about a maximum of 300 million euros in costs [voor onder meer de huur]† On balance, this is a profitable investment,” says Vermeulen.
“But there aren’t that many of those FSRUs in the world,” says Peters of TNO. No more than seventy worldwide. And that’s not the only one bottle neck in the pursuit of much more LNG. This also applies to the number of LNG tankers in the world. “And how do you get enough LNG? Qatar has already contractually committed its production to Asia for the coming years. In the US, more capacity for its shale gas is being worked on, but that will quickly take two or three years. So there are quite a few question marks there.”
Half-empty gas storage rooms
In addition to focusing on LNG, the government wants to prevent gas shortages by better replenishing stocks before the winter. The question is whether that will work.
Last winter was more of a prolonged autumn and that worked out well for security of supply. Because the five gas storage facilities were only 58 percent full in October last year, not comfortable on the eve of winter. That is now percentage below 20 decreased and the filling level should increase again from April. These storage facilities are essential to meet any peak demand, especially if the regular suppliers of extra gas – Groningen and Russia – no longer provide.
Until recent years, filling the storage facilities, which account for almost 15 billion cubic meters of gas, was no problem. Because gas prices were higher in the winter than in the summer, it was a commercially attractive activity for gas companies. The current crisis in the energy market has put an end to this automatism. Due to the high prices for the coming months, filling has become a risky activity. The price may be much lower in winter when the stored gas is paid for. Hedging the risks could easily cost the government 6 to 7 billion euros, Jetten calculated this week.
In practice, there is no problem for most storage facilities, says a spokesperson for gas operator NAM. For example, it has been agreed with the government that the Norg and Alkmaar storage facilities will be filled by NAM in any case. The financial compensation for all participating parties is ultimately determined by an arbitration panel, as was agreed a year ago. In any case, the result was that last autumn Alkmaar was 100 percent full and Norg 80 percent full.
The biggest bottleneck is in the Bergermeer in North Holland. It is not only the high prices of the moment that are the problem. A serious obstacle is that the Russian state gas company Gazprom rents 40 percent of the capacity and according to Jetten it is “very doubtful” at the very least whether the Russians will fill the available space this year. A bad omen is that Gazprom did not fill ‘its’ part of the Bergermeer last year either.
“That is where the greatest risk lies for the cabinet,” says Peters. The mentioned risk of 6 to 7 billion is admittedly speculative, but according to the TNO man it can be directly linked to Bergermeer. “If you fill that now, about 4.5 billion cubic meters, it costs about 9 billion euros. When gas prices have returned to a more normal level in the winter, for example at 50 cents per cubic meter, this results in a loss of almost 7 billion. 40% of that money would go to Russia’s Gazprom. I honestly don’t see that happening anytime soon.”
It is easy for director Bart Jan Hoevers of the Gasunie, he said in the House of Representatives on Thursday. As far as he’s concerned, companies can choose. “Either they use the capacity they rent in a gas storage facility or they return that capacity. The Ministry of Economic Affairs can then designate a party that will fill the gas storage sufficiently.”
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