Production at the EU’s largest gas field ends for good, Exxon and Shell sue Netherlands for compensation

The Dutch Senate has approved the long-awaited law ending gas production from the largest field in the European Union. The Groningen field will therefore cease production after decades during which output exceeded 70 bn cubic metres of natural gas per year in some years. The law will ensure that production cannot be resumed. ExxonMobil and Shell, which jointly operate the field, have filed a lawsuit against the Dutch state seeking compensation for lost profits.

Not even the fading energy crisis, during which wholesale natural gas prices rose to a record above EUR 300/MWh, was able to reverse the fate of the European Union’s largest natural gas field. The Dutch Senate this week approved a law that will ultimately prohibit further production from the Groningen field.

The reason for ending gas production was the frequent earthquakes in the area, which were linked to continued extraction.

The adoption of the law remained a contentious political issue until the last moment. Last year, the Dutch government had already pledged that the field would cease production as of 1 October last year. However, the pledge was ultimately broken. A drop in temperatures in the first half of January led to production being resumed in limited volumes from two production wells.

The closure of the Groningen field last came into the public spotlight at the beginning of the month, when the Senate postponed its vote on the adoption of the law in question. One minister even considered resigning if approval of the law were delayed again, which would jeopardise seismic stability in the area.

The decision to end production also has its critics. They point out that the field is crucial to ensuring security of gas supply and plays an important role in safeguarding the European Union’s energy self-sufficiency. However, their support declined as the energy crisis subsided, and they were ultimately unable to reverse the decision to end production.

The end of production has a significant impact on NAM, which operates the field. It is a consortium of Shell and ExxonMobil, major players in gas production. As the Groningen field still holds approximately 450 bn m3 of gas, the two companies have filed a lawsuit against the Netherlands with the relevant court. It should decide whether the two companies are entitled to compensation for the forced cessation of operations and the loss of return on their investment.