How much Russian, Groningen, Norwegian or Algerian gas flows through the Dutch pipelines every day? A few years ago, the Ministry of Economic Affairs wanted to answer that question. The department, responsible for the energy supply, called in the Central Bureau of Statistics to gain some insight into the international gas market within its own national borders.
“These numbers are difficult to obtain because the gas market has been liberalized for more than twenty years,” says gas expert René Peters of TNO. “On that market, there is no trading on a specific quality of gas, but simply the amount of energy required. The properties can be adjusted later.” If the foreign gas enters the Netherlands from Germany, it may involve mixtures of, for example, Norwegian, Russian or Danish gas. As a result, it cannot simply be attributed to one country.
Now that tensions between Russia and Ukraine are rising, the question is to what extent the Netherlands depends on supplies from the Russian state company Gazprom for its heat and power production. Should the supply decrease for whatever reason, is that a big deal?
There are hardly any permanent agreements with Russia anymore, says Peters, and that makes it difficult to determine exactly the contribution to the Dutch gas demand. Much Russian gas is obtained through short-term contracts. “If you had long-term contracts with Russia, then you certainly know how much gas comes from there. On the ‘spot market’ [waar kortetermijncontracten worden verhandeld, red.] you often do not know where the gas comes from, nor do you know whether the customer then resells it to a Belgian or English party. The Netherlands is also an important transit country.”
Confidential Figures
In its research at the request of the ministry, CBS still bases itself on figures from 2017. There are more up-to-date data, but the statistical office does not want to disclose them due to confidentiality. Gasunie – responsible for the transport of gas – and trading house Gasterra, a semi-government company, are also unwilling or unable to provide data.
Nevertheless, it is possible to estimate the various origins of ‘our’ natural gas. The composition has rapidly become more international in recent years. In 2013, it was still 53 billion cubic meters extracted from Groningen soil, well more than the Dutch consumption of 40 billion cubic meters. This year, according to current agreements, a maximum of 7.6 billion in Groningen gas will be extracted, which is partly exported. A comparable quantity comes from other parts of the Netherlands, for example from the North Sea. These so-called ‘small fields’ are good for a yield of 8 billion cubic meters. For years, a maximum of about 10 billion has come from Norway and the same amount of liquefied gas (LNG) can enter the country via the port of Rotterdam – the ‘Gate terminal’. That is about 34 billion of the required 40.
“In practice, the rest has to come from Russia, that’s about 15 percent of our total use,” says Peters. “You can say that the Russian gas is replacing the lower yield from the Groningen field. After all, the other suppliers are already at their maximum capacity.” In practice, much more Russian gas flows through the Netherlands: a large part of it goes via a pipeline from North Holland to England.
Oil and gas expert Jilles van den Beukel also estimates that Russia will supply about 15 percent of the required gas this year. “It is even more important that the Netherlands is part of the European gas market, where the price is determined. And Russia supplies about 30 to 35 percent to that market, which is 500 billion cubic meters in size.”
These supplies are fixed with contracts, because Russia does not currently supply the spot market. This can be seen in the reduced Russian deliveries: in 2019 the share in Europe was still 40 percent. “Everyone is asking what would happen if Russia cuts its supplies due to military action. But why would they do that?” asks Van den Beukel.
Transit port
In any case, it would cost Russia a lot of money. In an earlier confrontation with Ukraine, Russia temporarily halted the gas supply to that country. “That was a payment conflict and then the distribution was cut off. Because Ukraine was the main transit port at the time, everyone got anxious. Now those gas flows – via Nordstream 1 in the Baltic Sea, via Poland or via Turkey – are more spread out. And Russia has always kept its contractual agreements.”
It may be an advantage that the Netherlands (with 15 percent Russian gas) is less dependent than the average in Europe. And in the event of rising tensions, there may still be fallback options. “I don’t know whether that is feasible, but you could possibly call on Groningen in the event of a crisis,” says TNO expert Peters. “I think the risk of a sudden peak demand due to a few very cold weeks is greater than the loss of Russian supplies. Sudden peak demand is less easily resolved with our dwindling supplies than international tensions that gradually mount.”
The Netherlands does run more financial risk because it has almost no long-term contracts. As a result, it has to make more purchases on the currently more expensive spot market. In recent years, the gas price was so low that trading on that short-term market was much more lucrative. “We trust that the free market will always function well and that long-term contracts for security of supply are unnecessary. You can question that,” says Van den Beukel.
According to the former specialist of the NAM (the operator of the Groningen fields), the Netherlands assumes that you can bring in enough on the international gas market if you pay enough. See the recent price explosions in December as supply slipped. The same can happen in international political tensions. “What is disappointing in the Netherlands now is the price tag attached to that gas. Security of supply is mainly there for the country that can and is willing to pay the most.”
A version of this article also appeared in NRC on the morning of January 20, 2022
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