Netherlands keeps on 'pilot light' for Groningen gas field
Quantum Commodity Intelligence – The Netherlands is briefly extending the operational life of the giant Groningen gas field, keeping the system on standby so gas can still be extracted this winter if the need arises.
Formerly Europe's largest gas production system, Groningen had been effectively closed as an operation field in October 2023, with a full wind down this year scheduled to bring about a final and permanent shutdown.
But the Netherlands government said this week it will keep the field in a mothballed state for now, whereby gas can still be accessed in the event of an emergency supply situation brought on by an extended cold snap, with much of Europe hit by an Arctic blast this week.
"This move which is referred to as "pilot light" allows minimal production to resume if average temperatures over a 24 hour period fall below -6.5 degrees Celsius. This is a preparatory step which would allow for actual production in an emergency situation," said Warren Patterson, head of ING's commodity research.
The announcement helped contain any fears over a spike in gas prices as a result of the cold snap, with benchmark TTF tumbling around 8.5% on Monday despite the cold weather hitting Europe.
Temperatures
Temperatures in the Netherlands are forecasted at around -5 Celsius Tuesday night, which is unlikely to be cold enough to trigger a Groningen reboot, with European gas inventories running at around 80% capacity following a relatively mild winter up until now.
The cold snap is also expected to be relatively brief, with the Netherlands escaping the freezing temperatures seen in Germany and Scandinavia.
Benchmark TTF futures for Feb24 continued to slide Tuesday on forecasts for milder weather, trading around 3% lower at around €30.70/MWh in late morning European time, testing six-month lows.
Groningen was discovered in 1959 by ExxonMobil and Royal Dutch Shell and had been a source of cheap and plentiful fuel for the Netherlands and its neighbours.
However, decades of extraction have caused the soil in the surrounding area to sink by a foot (30cm), while hundreds of earthquakes have rumbled the houses of half a million locals, which has sparked calls to end gas extraction permanently.
The Dutch government had cut volumes down from over 25 billion cubic meters in 2015/2016 to a fifth of that level by 2022.
Russia's invasion of Ukraine and Europe's potential energy crisis last winter gave Groningen an extended lease of life, albeit short-term, with the final closure date pushed into 2023 and now briefly extended into 2024.
