The agreements that the State made in 2018 with the oil companies about gas extraction in Groningen are no longer tenable due to the war in Ukraine, which has turned the gas market upside down. Shell therefore wants to make new agreements as soon as possible and believes that the State is wrongly hesitating. That said Shell Netherlands director Marjan van Loon on Thursday morning to the parliamentary inquiry committee in The Hague that is investigating gas extraction. She found it “frustrating” that this is not happening.
In 2018, then minister Eric Wiebes (VVD, Economic Affairs) announced that gas extraction would be reduced to zero before 2030. From that point of departure, agreements were made in that year with the oil companies about the distribution of the declining gas revenues and the payment of the increasing costs of damage and reinforcement. “A lot has changed since we concluded the Outline Agreement in 2018,” said Van Loon in the interrogation room.
She referred to the current geopolitical situation and the unrest on the gas market, in which the Netherlands has become much more dependent on the import of foreign gas that is stored in underground gas storage facilities. “I have agreements with the government that really no longer match where we are now.”
Agree on Main Features
Van Loon was questioned by the committee of inquiry about the decision taken in March 2018 to reduce gas production to zero. She stated that Shell itself had put this ‘route’ on the table first, even before Wiebes came up with it. She already discussed this with the top of the Ministry of Economic Affairs in September 2017, before he took office, she said. The reason was an investigation by the Public Prosecution Service into the question of whether NAM could be prosecuted for endangering citizens’ lives through gas extraction. The oil companies then no longer wanted to be ‘at the wheel’. If the government wanted to continue gas extraction, they would also have to take legal responsibility for it, they argued.
In 2018, this led to the Agreement on Main Lines, in which it was agreed that the government would assume liability, but that NAM would continue to reimburse the costs of damage and reinforcement. At the time, it was agreed, Van Loon stated, that the parties would reconvene if the situation changed. But recent attempts by Shell to restart the conversation, she says, have come to nothing. That is why there are now two arbitration cases of the oil companies against the State. “I don’t want that arbitration at all, I think we should work it out together,” said the Shell director. “The solution is within reach.”
Public support
According to her, this solution lies, among other things, in creating a single fund from which the Mining Damage Institute and the National Coordinator Groningen can jointly draw on for repairing damage and strengthening houses. But the House of Representatives, among others, is afraid that the oil companies want to ‘buy off’ their responsibilities, while the problems in Groningen may continue for a long time. Van Loon swore to the committee of inquiry that that is not what Shell wants.
She acknowledged that until about 2017 her company’s priority was indeed to make maximum use of the Groningen gas field. But that has changed, she says. The company’s priority is now to improve the situation in Groningen. The company has now realized that it cannot develop economic activities without social support, she argued. “Everything has to be tested on: is it getting better in Groningen? I want to continue to work for that and my company fully supports that.”
Shell no longer feels the need to earn money from gas extraction in Groningen, she emphasized. “As far as we are concerned, all the money goes to Groningen and does not go to the shareholders. We put it in damage and reinforcement. We would like to invest what is left in projects.” This is in sharp contrast to the attitude of ExxonMobil, the other shareholder in gas extraction company NAM.
Filip Schittecatte, who was commercial director of the Dutch division of the American company for many years, called it “a pity” during his interrogation on Wednesday that the entire gas field under Groningen cannot be emptied, especially now that gas prices have become so high. “I found it difficult to see that value go to waste.” ExxonMobil also said it is “constantly concerned” about the cost of the damage and reinforcements.
This article is also part of our live blog: Top official Finance: don’t make a fuss about the costs of damage and strengthen
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